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Black  on  Bankruptcy.  .  ^  ^  ,oj  tp^  \ 

Black,  on  Construction  and  Interpretation  of  Laws  (zd  iL.a.). 

Black  on  Constitutional  Law  (3d  Ed.). 

Black   on   Judicial   Precedents. 

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Cooley    on    Municipal   Corporations. 

Costigan  on  American  Mining  Law. 

Croswell  on  Executors  and  Administrators. 

Dobie  on  Bailments  and  Carriers. 

Eaton  on  Equity  Jurisprudence   (2d  Ed.). 

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Gilraore  on  Partnership. 

Hale  on  Damages  (2d  Ed.). 

Hughes   on   Admiralty  (2d  Ed.). 

Hughes  on  Federal  Jurisdiction  and  Procedure  (2d  Ed.). 

McKelvey  on  Evidence   (3d  Ed.). 

Norton  on  Bills   and   Notes   (4th  Ed.). 

Shipman  on  Common-Law  Pleading  (3d  Ed.). 

Shipman  on  Equity  Pleading. 

Smith's  Elementary  Law. 

Tiffany  on  Agency  (2d  Ed.). 

Tiffany   on  Banks    and   Banking. 

Tiffany  on  Persons  and  Domestic  Relations  (3d  Ed.). 

Tiffany  on  Sales  (2d  Ed.). 

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Published  and  for  sale  by 
WEST  PUBLISHING  CO.,  ST.  PAUL,  MINN. 


C11517— 1 


HANDBOOK 


OF    THE 


LAW  OF   BANKS  AND 
BANKING 


By  FRANCIS  B.  TIFFANY 

AUTHOR  OF  "DEATH  BY  WRONGFUL  ACT"  AND  HANDBOOKS  OH 
"SALES"  AND  "PRINCIPAL  AND  AGENT" 


ST.  PAUL,  MINN. 

WEST  PUBLISHING  CO. 

1912 


CJOPTBIGHT,    1912 
BY 

WEST  PUBLISHING  COMPANY 

(Tiff.Bks.&  B.) 


■^\jCi  -  --^ 


PREFACE 


The  object  of  this  book  is  to  present  the  law  of  the  subject 
in  brief  compass,  in  accordance  with  the  plan  of  the  Hornbook 
Series.  The  author  has  had  in  view,  however,  that  the  sub- 
ject is  one  that  concerns  rather  practitioners  than  law  stu- 
dents, and  for  this  reason  he  has  covered  many  questions  in 
the  te-^t  and  notes  that  mii;ht  have  been  omitted,  had  the 
book  been  intentled  primarily  for  law  students,  and  he  nas 
made  a  fuller  citation  of  the  decisions  than  he  would  other- 
wise have  done.  The  fundamental  part  of  the  law  of  banks 
and  banking-  relates  to  the  various  transactions  between  banks 
and  bankers  and  those  dealing  with  them.  The  author  has 
not  entered  upon  the  field  of  corporation  law,  except  so  far 
as  the  law  of  banking  corporations  seemed  to  require  special 
discussion,  and  he  has  not  dealt  with  the  varying  statutory 
provisions  of  the  different  states  respecting  banking  corpora- 
tions; but  he  has  endeavored  to  cover  the  field  of  national 
banks  and  the  National  Bank  Act,  so  far  as  it  is  afl;'ected  by 
the  decisions.  The  National  Bank  Act  and  other  provisions 
of  the  federal  statutes  relating  to  national  banks  are  printed 
in  an  Appendix,  with  historical  and  explanatory  notes  pre- 
pared by  the  editorial  staff  of  the  publishers.  When  treating 
of  questions  concerning  checks  and  other  negotiable  instru- 
ments, the  author  has  referred  to  the  Negotiable  Instruments 
Law,  and  has  pointed  out  the  not  infrequent  changes  intro- 
duced by  it. 

With  a  view  to  making  the  book,  so  far  as  possible  within 
its  scope,  an  index  to  the  cases,  the  publishers  have  supple- 
mented the  notes  by  references,  prepared  by  their  editorial 
staff,  to  the  American  Digest  System,  both  to  the  Century 
and  to  the  Decennial  (Key-Number)  Digests.  These  citations 
will  enable  any  one  who  consults  the  book,  not  only  to  turn 
quickly  to  additional  cases  upon  the  particular  point  to  which 
the  note  refers,  but  by  means  of  the  Key-Number  to  command 
the  later  cases  which  may  be  found  in  the  digests  hereafter 
published.  ^'  ^-  '^^ 

St.  Paul,  June  20,  1912. 

(v)* 


708562 


TABLE  OF   CONTENTS 


CHAPTER  I 

INTllODUCTOKY 

Section  Page 

1.  Banking    1 

2.  Bank— Banker    2-6 

3.  Kinds  of  Banks 7-10* 


CHAPTER  II 
DEPOSITS 

4.  Kinds  of  Deposits — General  Deposit 11 

5.  Special  Deposit 12 

6.  Deposit  for  Specific  Purpose 12-24 

7.  Receipt  and  Entry  of  General  Deposits — By  Whom  Re- 

ceived    24 

8.  Entry  in  Pass  Book 24-27 

9.  Deposit  of  Paper — Deposit  for  Collection 28 

10.  Sale  or  Deposit  for  Collection 28 

11.  Check  on  Depository 29^1 

12.  Title  to  and  Disposition  of  General  Deposits — In  Gen- 

eral    41 

13.  Deposit  by  Trustee 41^2 

14.  Deposit  by  Agent 42 

15.  Deposit  in  Name  of  Third  Person 42 

16.  Assignment,   Attachment,    etc 42-56 

17.  Payment — In    General 56 

18.  Interest 50-61 

19.  Bank's  Lien  or  Right  of  Set-Off— In  General 61-62 

20.  Deposit  Made  and  Debt  Owing  in  Different   Ca- 

pacities    62 

21.  Right  of  Surety  to  Have  Deposit  Applied 62-72 

22.  Set-Off  by  Depositor 73-74 

Tiff.Bks.&  B.-  (vii) 


Viii  TABLE   OF   CONTENTS 

Section  -  Page 

23.  Certificate  of  Deposit — Definition  and  Effect 75 

24.  Necessity  of  Demand 75-82 

25.  Overdrafts 82-84 

26.  Statement  of  Account— Effect .- .  84 

27.  Duty  of  Depositor 84-90 

28.  Action  for  Deposit — Demand  and  Limitation 90 

29.  Burden   of   Proof 90-95 


CHAPTER  III 

CHECKS 

30.  Definition    96-108 

31.  Liability  of  Drawer  to  Holder — In  General 107 

32.  Presentment  and  Notice  of  Dishonor 107 

33.  Reasonable  Time  for  Presentment 107-119 

34.  Negotiability  and  Transfer — In  General 119 

35.  Liability   of   Indorser 119-120 

36.  Holder  in  Due  Course 120-127 

37.  Liability  of  Drawee  to  Holder 127-130 

38.  Certified  Checks— Liability  of  Bank 131 

39.  Liability  of  Drawer  and  Indorsers 131-142 


CHAPTER  IV 
PAYMENT  OF   CHECKS 

40.  Duty  of  Bank  to  Depositor 143-147 

41.  Rights  of  Bank  upon  Payment — In  General 148 

42.  Revocation  of  Order 148-158 

43.  Forged  Checks — Signature  of  Drawer  Forged 159 

44.  Altered  Check 1.59 

45.  Forged   Indorsement 159-176 


CHAPTER  V 

CLEARING  HOUSES 

46.  Clearing  House  System 177-179 

47.  Effect  of  Payment  Through  Clearing  House 179-184 

48.  Effect  of  Rules— Non-Members 184-186 

49.  Clearing  House   Certificates 187-188 


TABLE   OP   CONTENTS  IX 


CHAPTER  VI 

COLLECTIONS 
Section  Ppge 

50.  Relation  Between  Depositor  for  Collection  and  P.ank..  1S9-192 

51.  Duties  of  Bank  in  Making  Collection 192-204 

52.  Rights  and  Liabilities  as  to  Proceeds  of  Collection — 

Relation  of  Bank  to  Customer 204-205 

53.  Insolvency    of    Bank 205 

54.  Bank's    Lien 205-211 

55.  Collection  by  Correspondent  Bank — Relation  Between 

Depositor  and  Depositary  and  Collecting  Banks  212-213 

56.  Set-Off   of   Collecting    Bank    Against    Forwarding 

Bank 213 

57.  Lien  of  Collecting  Bank 213-224 


CHAPTER  VII 

LOANS  AND  DISCOUNTS 

58.  Power  of  Loaning  and  Discounting 225 

59.  Restrictions  upon  Power  to  Loan 225 

GO.     Meaning  of  Discount 22G-235 

61.  Rate  of  Interest— Usury— In  General 235 

62.  National    Banks ,. . .  235-24G 

63.  Collateral    Security— In    General 246 

64.  Bank's  Own  Stock 247 

65.  Real  Estate  Mortgage 247-255 


CHAPTER  VIII 

BANK  NOTES 

66.  Definition  and  Character 256 

67.  Power  to  Issue 256-266 

CHAPTER  IX 

BANKING    CORPORATIONS 

68.  Incorporation   2G7-269 

69.  Place  of  Transacting  Business 2G9-273 

70.  Capital  Stock 274 


X  TABLE   OF   CONTENTS 

Section  Pag® 

71.  Power  as  to  Contracts 275 

72.  Buying  and  Selling  Property 276-2S2 

73.  Borrowing    Money 282-284 

74.  Guaranty  and  Suretyship , .  284-288 

75.  Ultra  Vires  Acts  and  Contracts 289-296 

76.  Liability  of  Officers  to  Bank — At  Common  Law 296 

77.  Remedies  Against  Officers 296-297 

78.  Statutory    Liability 297-307 


CHAPTER  X 

REPRESENTATION  OF  BANK  BY  OFFICERS. 

79.  In   General 308 

80.  Directors 309-312 

81.  President  31.3-318 

82.  Cashier    .318-326 

83.  Tellers  and  Subordinate  Officers 327-328 

84.  Admissions  and  Representations 328-332 

85.  Notice — In    General 333 

86.  Disclosure  Against  Interest 333-344 


CHAPTER  XI 

INSOLVENCY 

87.    In  General 345 

88             Liquidation— Preferences   345-349 

89.  Deposit  after  Insolvency 349-352 

90.  Checks  and  Drafts 352 

91.  Set-Off   353 

92.  Wrongful  Receipt  of  Deposit — Following  Trust  Fund 

—Preference 354-359 


CHAPTER  XII 

NATIONAL  BANKS 

9.3.     In  General 360-364 

94.  Formation   .364-368 

95.  Capital    Stock— Amount 368-375 

96.  Transfer  of  Shares 37.'>-376 

97.  Lien  on  Shares 377-378 

98.  Rights  of  Stockholders 378-379 


TABLE  OF  CONTENTS  H 

Section  ^-  Page 

90.     Dividends 379-381 

100.  Liability  of  Stoclvholders  for  Debts  of  Bank 381-3S2' 

101.  Who  are  Liable  as  Siiareholders 382-392 

102.  Kiiforceuieut  of  Sbarebolders'  Liability 392-390 

103.  Olliters— In    General 390-397 

104.  Civil   Liability  of  Officers— At  Common   Law 397-398 

105.  Statutory   Liability 398-404 

106.  Criminal  Liability  of  Officers 405-410 

107.  Forfeiture  and  Dissolution 410-411 

108.  Voluntary  Liquidation 411^12 

109.  Involuntary  Liquidation 413-421 

110.  Transfers  and  Payments  Affected  by  Insolvency — Pref- 

erences   s 421—425 

111.  Attachments,  Injunctions,  and  Executions 42.5-427 

112.  Actions  by  and  Against  National  Banks 428-434 

113.  Taxation  by  States 434-441 


CHAPTER  XIII 

SAVINGS  BANKS 

in.     Nature  of  Savings  Bank 442-446 

115.  Management  and  Officers 44G-448 

116.  Relation  Between  Bank  and  Depositor 448-450 

117.  By-Laws— Contract  of  Deposit 4.50^-151 

118.  Payment  on  Production  of  Pass  Book 451-454 

119.  Gift  of  a  Deposit — Deposit  in  Trust 454-45.5 

120.  Deposit  in  Name  of  Another 4.55 

1"2] .             Delivery  of  Pass  Book 455 

122.            Joint  Deposit 455^61 


APPENDIX 
Acts  of  Congress 463-579 


This  volume  contains 
Key- Number  Annotations 

Xkat  IS  to  say,  for  every  f)omt  of  law  wrucn  is  stated  or 
discussed  m  tne  text,  and  in  sufjjjort  of  ■vvnich  cases  are 
cited,  tkere  is  added  to  the  autnor  s  note  a  citation  to  tne 
Key-Number  section  or  sections  in  tne  Decennial  Digest 
or  m  tke  Key-Number  Series,  under  wnich  all  cases  di- 
rectly involving  tKat  f)oint  nave  teen  digested.  A  similar 
citation  to  tKe  Century  Digest  is  given,  except  wKere  tke 
t)rincif)le  involved  is  one  on  wnicn  no  case  law  existed 
t)rior  to  1897. 


Tiff.Bks.&B.  (xii)t 


HANDBOOK 


OF    THE 


LAW   OF   BANKS  AND 
BANKING 


CHAPTER  I 
INTRODUCTORY 

1.  Banking. 

2.  Bank— Banker. 

3.  Kinds   of  Banks. 

,  BANKING 


1.  The  business  of  banking  consists  primarily  in  the  receiv- 
ing by  a  corporation  or  a  person  engaged  therein, 
called  a  bank  or  a  banker,  of  the  money  of  others 
upon  general  deposit — that  is,  subject  to  repay- 
ment upon  demand  or  order — and  in  the  employ- 
ment of  such  money  by  the  bank  or  banker  for  its 
or  his  own  benefit  in  making  advances  to  others  by 
way  of  loan  and  of  discount  of  promissory  notes 
and  bills  of  exchange.  To  the  functions  of  receiv- 
ing deposits  and  of  loaning  and  discounting  may 
be  added  a  third,  that  of  issuing  bank  notes,  or  the 
promissory  notes  of  the  bank  or  banker,  for  use  in 
general  circulation  as  a  substitute  for  money.  The 
business  of  banking  usually  includes  also  the  buy- 
ing and  selling  of  exchange,  coin,  and  bullion,  the 
remission  of  money,  the  collection  of  commercial 
paper,  and  the  receiving  of  special  deposits. 

TIFF.BKS.&  R.— 1 


INTRODUCTORY  (Ch.  1 


BANK— BANKER 

2.  Where  the  business  of  banking  is  conducted  by  a  corpo- 
ration thereto  empowered,  the  corporation  is  usual- 
ly termed  a  "bank,"  and  where  the  business  is  con- 
ducted by  an  individual  or  by  a  firm,  the  individual 
or  the  firm  is  termed  a  "banker"  or  "bankers." 
The  term  "bank"  is  also  used  to  designate  the 
building  or  office  where  such  business  is  con- 
-  ducted/ 

Banking — Essential  Functions 

Banks,  it  is  often  said,  are  of  three  kinds:  Banks  of  de- 
posit, which  receive  money  on  deposit;  banks  of  discount, 
which  loan  money  on  collateral,  or  by  means  of  discount  of 

1  The  following  are  some  of  tbe  definitions  of  "bank" : 

"A  bank  is  an  institution,  usually  incorporated,  with  power  to  is- 
sue its  promissory  notes  intended  to  circulate  as  money  (known  as 
bank  notes) ;  or  to  receive  the  money  of  others  on  general  deposit, 
to  form  d  joint  fund  that  shall  be  used  by  the  institution  for  its  own 
benefit,  for  one  or  more  of  the  purposes  of  making  temporary  loans 
and  discounts,  of  dealing  in  notes,  foreign  and  domestic  bills  of  ex- 
change, coin,  bullion,  credits,  and  the  remission  of  money ;  or  with 
both  these  powers,  and  with  the  privileges,  in  addition  to  these  basic 
powers,  of  receiving  special  deposits,  and  making  collections  for  the 
holders  of  negotiable  paper,  if  the  institution  sees  fit  to  engage  in 
such  business."     Morse,  Banks  &  B.  (4th  Ed.)  §  2. 

"An  institution,  generally  incorporated,  authorized  to  receive  depos- 
its of  money,  to  lend  money,  and  to  issue  promissory  notes  (usually 
known  by  the  name  of  bank  notes),  or  to  perform  one  or  more  of 
these  functions."  Bouvier,  L.  Diet.,  quoted  in  Reed  v.  People  ex  rel. 
Hunt.  12.5  111.  592,  596.  18  N.  E.  295,  1  L.  R.  A.  324;  Farmers'  &  Me- 
chanics' Bank  v.  Baldwin.  2.3  Minn.  198.  203.  23  Am.  Rep.  683. 

"An  association  or  corporation  whose  business  it  is  to  receive  mon- 
ey on  deposit,  cash  checks  or  drafts,  discount  commercial  paper, 
make  loans,  and  issue  promissory  notes  payable  to  bearer,  called 
'bank  notes.' "  Rapalje  &  L.  L.  Diet,  (quoted  in  Wells,  Fargo  &  Co. 
V.  Northern  Pac.  R.  Co.  [C.  C]  10  Sawy.  441,  23  Fed.  469,  471). 
fre  "Banls  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2;  Cent.  Dig.  §  2. 


§   2)  BANK — BANKER  ^      3 

commercial  paper ;  and  banks  of  circulation,  or  of  issue,  which 
issue  bank  notes,  payable  on  demand  to  bearer.^  It  is  doubt- 
less true  that  there  have  existed  so-called  banks  which  exer- 
cised only  the  function  of  receiving  deposits  and  paying  out  to 
the  depositor  an  equivalent  amount  upon  demand.^  And  it  is 
also  true  that  there  have  existed  banks  of  circulation  which 
did  not  receive  deposits.*  But  an  institution  that  merely  ex- 
ercised the  function  of  discount,  neither  receiving  deposits 
nor  issuing  bank  notes  as  a  means  of  obtaining  funds  with 
which  to  make  advances,  would  not  be  a  bank." 

2  Oultou  V.  German  Savings  &  Loan  Soc,  17  Wall.  100.  21  L.  Ed. 
618;  Wells,  Fargo  &  Co.  v.  Northern  Pac.  Ry.  Co.  (C.  C.)  10  Sawy. 
441,  23  Fed.  469,  471 ;  Reed  v.  People  ex  rel.  Hunt,  125  111.  092,  .50(). 
18  N.  E.  295,  1  L.  R.  A.  324 ;  Farmers'  &  Mechanics'  Bank  v.  Bald- 
win, 23  Minn.  198,  203,  23  Am.  Rep.  683;  Bouvier,  L.  Diet.;  Rapalje 
&L.  L.  Diet.  See  ''Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  2; 
Cent.  Dig.  §  2. 

3  A  bank  of  this  obsolete  type  was  the  Bank  of  Amsterdam.  See 
Duubar,  Theory  &  History  of  Banking,  IS,  82  et  seq. 

In  Western  Invest.  Banking  Co.  v.  Murray,  6  Ariz.  215,  56  Pac.  728, 
it  was  held  that  a  corporation  which  received  money,  invested  it  for 
its  depositors  by  loaning  it  in  their  names,  and  collected  rents 
and  interest  due  on  such  loans,  such  rents  and  interest  being  subject 
to  check  by  those  for  whom  they  were  collected,  charging  a  commis- 
sion to  them,  as  well  as  to  borrowers,  was  a  bank.  Here,  the  only 
banking  function  exercised  was  that  of  deposit,  which  was  confined 
to  the  funds  after  collection. 

Under  an  act  declaring  the  receiving  of  money  on  deposit  as  a 
regular  business  by  a  person  or  corporation  to  be  a  banking  busi- 
ness, whether  the  deposit  is  made  subject  to  check  ov  is  evidenced 
by  a  certificate  of  deposit,  pass  book,  note,  receipt,  or  other  writing, 
a  department  store  which  received  deposits  up  to  a  certain  amount, 
issued  pass  books,  paid  interest  on  the  amounts  deposited,  and  paid 
the  principal,  with  interest  thereon,  on  demand,  in  money  or  goods 
at  the  election  of  the  depositor,  was  engaged  in  the  banking  busi- 
ness. McLaren  v.  State,  141  Wis.  577,  124  X.  W.  607,  135  Am.  St. 
Rep.  55.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2;  Cent. 
Dig.  §  .?. 

4  Bagehot,  Lombard  Street,  §  4. 

8  "Banks  in  the  commercial  sense,"  says  Clifford,  J.,  in  Oulton  v. 


4  INTRODUCTORY  (Ch.  1 

It  is  of  tbe  essence  of  the  business  of  banking,  as  it  is  con- 
ducted to-day,  that  the  bank  or  banker  should  receive  on  de- 
posit the  money  and  funds  of  other  persons.®  The  distinc- 
tive function  of  the  banker  begins  as  soon  as  he  uses  the  mon- 
ey of  others;  so  long  as  he  uses  his  own  money,  he  is  only 
a  capitalist.'^  In  exercising  the  function  of  discount,  banks 
and  bankers  do,  indeed,  use  their  own  capital,  as  well  as  the 
funds  received  from  deposits  and  their  bank  notes,  if  they 
issue  bank  notes ;    but  an  institution  that  practices  only  dis- 


Gerinan  Savings  &  Loan  Soc,  17  Wall.  109,  21  L.  Ed.  618,  "are  of 
three  kinds — of  deposit,  of  discount,  and  of  circulation.  Originally 
the  banking  business  consisted  in  receiving  deposits,  such  as  bullion, 
plate,  and  the  like,  for  safe-keeping,  until  the  depositor  should  see 
fit  to  withdraw.  Later,  bankers  began  to  loan  by  discounting  bills 
and  notes,  or  on  mortgage,  pawn,  or  other  security ;  and,  at  a  still 
later  period,  to  issue  notes  of  their  own,  intended  to  circulate  as 
money,  instead  of  gold  and  silver.  Modern  banks  frequently  exer- 
cise any  two,  or  even  three,  of  those  functions ;  but  it  is  still  true 
that  an  institution  prohibited  from  exercising  any  more  than  one 
of  them  is  a  bank  in  the  strictest  sense."  This  statement  is  open  to 
criticism,  so  far  as  concerns  the  dictum  that  an  institution  exei'cising 
only  the  function  of  discount  would  be  a  bank.  See  Morse,  Banks  «& 
B.  (4th  Ed.)  §  2.  But  see  McLaren  v.  State,  141  Wis.  577,  124  N.  W. 
667,  135  Am.  St.  Rep.  55.  Cf.  Earle  v.  American  Sugar  Refining  Co., 
74  N.  J.  Eq.  751,  71  Atl.  391. 

The  internal  revenue  act  of  the  United  States  defines  a  bank  or 
banker  as  follows:  "Every  incorporated  or  other  bank,  and  every 
person, "firm,  or  company  having  a  place  of  business  where  credits 
are  opened  by  the  deposit  or  collection  of  money  or  currency,  subject 
to  be  paid  or  remitted  upon  draft,  check,  or  order,  or  where  money  is 
advanced  or  loaned  on  stocks,  bonds,  bullion,  bills  of  exchange,  or 
promissory  notes,  or  where  stocks,  bonds,  bullion,  bills  of  exchange, 
or  promissory  notes  are  received  for  discount  or  for  sale,  shall  be  re- 
garded as  a. bank  or  banker."  Rev.  St.  U.  S.  §  3407  (U.  S.  Comp.  St. 
1901,  p.  2246).  This  definition  is  only  for  the  purposes  of  taxation, 
and  is  not  to  be  taken  as  a  definition  of  a  bank  or  banker  for  all  pur- 
poses. /See  "Banks  and  Bankiiuj,''  Dec.  Dig.  {Key  Ao.)  §  2;  Cent.  Dig. 
§2. 

6  Morse,  Banks  &  B.  (4th  Ed.)  §  177. 

T  Bagehot,  Lombard  Street,  21,  quoting  Ricardo. 


§    2)  BANK — BANKER  5 

count,  without  receiving  deposits  or  issuing  bank  notes  is  sim- 
ply an  investor  of  its  own  money,  as  any  individual  may  be.* 
As  has  been  already  said,  banks  formerly  existed  which  did 
not  receive  deposits,  and  which  derived  their  only  means  of 
discounting  by  using  (in  addition  to  their  capital)  their  own 
engagements,  in  the  form  of  bank  notes,  for  the  payment  of 
money  upon  demand.  Indeed,  the  issue  of  bank  notes  was 
at  one  time  regarded  as  the  primary  and  distinguishing  func- 
tion of  banking,  and  an  institution  that  did  not  issue  them 
was  not  regarded  as  a  bank."  In  its  analysis,  the  obligation  of 
a  bank  to  its  depositors  is  essentially  the  same  as  its  obligation 
to  the  holders  of  its  bank  notes ;  that  is,  it  is  an  obligation  to 
pay  money  upon  demand,  so  that  in  each  case  the  means  of 
discount  is  derived  from  the  use  in  one  form  or  the  other  of 
its  own  engagement  to  pay  money  upon  demand.^"  Speaking 
broadly,  therefore,  banking  may  be  defined  as  the  exercise 
either  of  the  function  of  receiving  deposits  or  of  the  func- 
tion of  issuing  notes,  or  of  both  functions,  and  in  addition  the 

8  Life  Ass'n  of  America  v.  Levy,  33  La.  Ann.  1203 ;  Hubbard  v.  New- 
York  &  H.  R.  Co.,  36  Barb.  (N.  Y.)  286 ;  People  v.  Brewster,  4  Wend. 
(N.  Y.)  498;  Oregon  &  W.  Trust  luv.  Co.  v.  Rathburn,  5  Sawy.  32, 
18  Fed.  Cas.  555.  See  Dunbar,  Theory  &  History  of  Banking,  18. 
See  "Bunks  and  Banking,''  Dec.  Dig.  {Key  Xo.)  §  2;   Cent.  Dig.  §  2. 

9  See  Bagohot,  Lombard  Street,  97 ;  Dunbar,  Theory  &  History  of 
Banking,  96. 

This  conception  of  the  function  of  a  bank  survives  in  the  language 
of  some  of  the  state  constitutions,  vphich  prohibit  the  legislature  from 
granting  charters  for  "banking  purposes,"  or  prohibit  the  exercise 
of  the  privilege  of  "banking" ;  the  intent  being  merely  to  prohibit 
the  issue  of  bank  notes,  and  not  to  prohibit  the  practice  of  receiving 
deposits  and  of  discount.  See  Bank  of  Sonoma  County  v.  Fairbanks, 
52  Cal.  196;  Bank  of  Martinez  v.  Ilemme  Orchard  &  Laud  Co.,  105 
Cal.  376,  38  Pac.  963 ;  State  ex  rel.  Stone  v.  Union  Stock  Yards  State 
Bank,  103  Iowa,  549,  70  N.  W.  752 ;  Dearborn  v.  Northwestern  Sav. 
Bank,  42  Ohio  St.  617.  51  Am.  Rep.  S51.  See,  also,  State  v.  Scouga], 
3  S.  D.  55,  51  N.  W.  858,  15  L.  R.  A.  477,  44  Am.  St.  Rep.  756.  See 
."Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  197;  Gent.  Dig.  §§  7'43- 
75i. 

10  Dunbar,  Theory  &  History  of  Banking,  16  et  seq. 


6  INTRODUCTORY  (Ch.  1 

function  of  making  advances  by  way  of  loan  or  discount/^ 
But  having  in  view  the  manner  in  which  banking  is  concUicted 
to-day,  it  is  not  too  much  to  say  that  it  is  of  the  essence  that 
the  function  of  receiving  deposits  be  exercised,  and  that  the 
exercise  of  this  function,  together  with  that  of  using  the 
fund  created  by  the  deposits  in  discounting,  are  the  primary 
and  essential  features  of  banking.  The  additional  function  of 
issuing  bank  notes  may  or  may  not  be  exercised.  In  the 
United  States  to-day  only  the  national  banks  issue  bank  notes ; 
but  the  business  of  banking  is  conducted  also  by  deposit  banks, 
which  do  not  exercise  the  right  of  issuing  such  notes. 

Other  Functions 

In  addition  to  exercising  the  functions  of  deposit  and  dis- 
count, and  of  issue  where  this  is  authorized,  the  business  of 
banking  usually  includes  the  employment  of  the  deposits  of 
the  bank  in  .buying  and  selling  exchange,  coin,  and  bullion, 
and  also  the  remission  of  money,  the  collection  of  commercial 
paper,  and  the  receiving  of  special  deposits.  These  various 
kinds  of  business  are  engaged  in  by  bankers  because  they  are 
convenient  and  profitable,  but  they  are  not  confined  to  banks 
and  bankers.  A  corporation  is  not  a  bank,  nor  is  an  individ- 
ual a  banker,  because  of  engaging  in  some  or  all  of  these  ac- 
tivities, so  long  as  they  are  not  accompanied  by  the  receipt 
of  general  deposits  or  the  issue  of  bank  notes.  The  business 
of  collecting  commercial  paper  by  a  bank,  however,  usually 
involves  the  crediting  of  the  proceeds  of  the  collection  to  the 
deposit  account  of  the  customer,  and  in  that  case  involves  a 
banking  function. 

11  "Having  a  place  of  business  where  deposits  are  received  and  paid 
out  on  checks,  and  where  money  is  loaned  upon  security,  is  the  sub- 
stance of  the  business  of  a  banker."  Warren  v.  Shook,  91  U.  S.  704, 
23  L.  Ed.  421. 

Cf.  People  V.  Bartow,  6  Cow.  (N.  Y.)  290.  See  Banks  and  Bank- 
ing," Dec.  Dig.  (Key  A^o.)  §§  2,  120,  176;  Cent.  Dig.  §§  2,  293,  253. 


§  3)  KINDS    OF   BANKS  7 

KINDS  OF  BANKS 

3.  Banks  are  classified,  according  to  the  functions  which 
they  exercise,  as  (1)  banks  of  deposit;  (2)  banks 
of  discount;  and  (3)  banks  of  issue.  But  all  com- 
mercial banks  to-day  exercise  at  least  the  first  two 
functions,  and  some  of  them  exercise  also  the  third. 
Banks  are  also  classified  as  (1)  commercial  banks,  in 
which  the  business  is  conducted  for  the  benefit  of 
the  bank  itself;  and  (2)  savings  banks,  in  which 
the  business  is  conducted  for  the  benefit  of  the  de- 
positors. 
Banks  are  also  classified  as  (1)  private,  or  unincorpo- 
rated banks;  and  (2)  incorporated  banks,  which 
include  in  this  country  (a)  state  banks,  or  banks 
incorporated  under  state  law ;  and  (b)  national 
banks,  or  banks  incorporated  under  federal  laws. 

Kinds  of  Banks 

The  classification  of  banks  as  banks  of  deposit,  banks  of 
discount,  and  banks  of  circulation  or  issue  has  been  consid- 
ered. Banks  are  also  classified  as  commercial  banks  and  non- 
commercial or  saving's  banks.  'In  a  commercial  bank,  .the 
business  of  banking  is  carried  on  in  the  manner  already  indi- 
cated for  the  benefit  of  the  bank  itself ;  that  is,  for  the  benefit 
of  the  stockholders,  if  it  be  incorporated,  or  for  the  benefit 
of  the  person  or  persons  engaged  in  the  business,  if  it  be  car- 
ried on  by  a  single  individual  or  by  a  firm.  A  savings  bank, 
on  the  other  hand,  is  carried  on  for  the  benefit  of  the  de- 
positors ;  the  funds  derived  from  deposits  being  loaned  or  ^ 
invested  in  mortgages,  bonds,  stocks,  or  otlier  securities  au- 
thorized by  the  law  under  which  the  bank  is  incorporated. 
Savings  banks  do  not  carry  on  the  business  of  banking  in  the 
ordinary  or  commercial  sense,  and  they  will  be  made  the  sub- 
ject of  a  separate  chapter.     Banks,  using  the  term  broadly, 


8  INTRODUCTORY  (Ch.  1 

anay  also  be  classified  as  incorporated  and  unincorporated.^^ 
Incorporated  banks  in  the  United  States  may  again  be  classi- 
fied as  national  banks,  or  banks  incorporated  under  the  fed- 
eral statutes,  and  state  banks,  or  banks  incorporated  under  the 
statutes  of  the  several  states.  National  banks  will  be  made 
"the  subject  of  a  separate  chapter.^^ 

jRight  to  Engage  in  Banking 

At  common  law  banking  is  open  to  all  persons.^*  Deposit 
and  discount,  and,  if  no  statutory  prohibition  exists,  issue  as 
well,^^  may  therefore  be  carried  on  by  individuals  and  firms, 
as  well  as  by  banking  corporations.  The  legislatures,  how- 
ever, have  power  to  forbid  individuals  or  firms,  as  well  as 
corporations,  from  engaging  in  banking  unless  they  conform 
to  legislative  requirements;  ^^   and  it  has  been  held  that  in  the 

12  See  Davis  v.  McAlpine,  10  lud.  137;  Norton  v.  Jewett,  12  Ind. 
426;  Way  v.  Butterworth,  106  Mass.  75;  Den  ex  dem.  State  v. 
Helmes,  3  N.  J.  Law,  1051,  1057 ;  Exchange  Bank  of  Columbus  v. 
Hines,  3  Ohio  St.  1,  32;  Bank  of  California  v.  San  Francisco,  142 
Cal.  276,  75  Pac.  832,  64  L.  R.  A.  918,  100  Am.  St.  Rep.  130.  -See 
'•Banks  and  Banking,"  Dec.  Dig.  {Key  2V'o.)  §  2;  Cent.  Dig.  §  2. 

13  Post,  p.  360. 

1*  See  People  v.  Utica  Ins.  Co.,  15  Johns.  (N.  T.)  358,  8  Am.  Dec. 
243;  Attorney  General  v.  Utica  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  371; 
vBank  of  Augusta  v.  Earle,  13  Pet.  519,  10  L.  Ed.  274. 

While  the  right  to  do  a  banking  business  is  not  a  franchise,  yet 
the  right  to  carry  on  such  business  through  the  agency  of  a  corpora- 
tion is  a  franchise,  dependent  on  a  grant  of  corporate  powers  by  the 
state.  Bank  of  California  v.  San  Francisco,  142  Cal.  276,  75  Pac. 
832,  64  L.  R.  A.  918,  100  Am.  St.  Rep.  1.30.  See  ''Banks  and  Bank- 
ing," Dec.  Dig.  {Keg  No.)  §  i;   Cent.  Dig.  §  1. 

15  Post,  p.  256. 

16  Noble  State  Bank  v.  Haskell,  219  U.  S.  104,  31  Sup.  Ct.  ISG,  55 
L.  Ed.  112,  32  L.  R.  A.  (N.  S.)  1062 ;  Engle  v.  O'Malley,  219  U.  S.  128, 
31  Sup.  Ct.  190,  55  L.  Ed.  128;  Assaria  State  Bank  v.  Dolley,  219  U.  S. 
121,  31  Sup.  Ct.  189,  55  L.  Ed.  123;  Nance  v.  Hemphill,  1  Ala.  551; 
Ex  parte  Pittman,  31  Nev.  43,  99  Pac.  700.  22  L.  R.  A.  (N.  S.)  266 ; 
Meadowcroft  v.  People,  163  111.  56,  45  N.  E.  991,  35  L.  R.  A.  176,  54 
Am.  St.  Rep.  447 ;  State  v.  Richcreek,  167  Ind.  217,  77  N.  E.  10S5,  5 
L.  R.  A.  (N.  S.)  874,  119  Am.  St.  Rep.  491;  Blakor  v.  Hood,  53  Kan. 


§  3)  KINDS    OF   BANKS  9 

exercise  of  the  police  power  they  may  restrict  Itie  right  of 
banking,  not  only  the  exercise  of  the  function  of  issue,  but  the 
exercise  of  the  functions  of  deposit  and  discount  as  well,  to 
corporations  organized  for  that  purpose — in  other  words,  that 
while  the  right  to  engage  in  banking  is  not  essentially  a  cor- 
porate franchise,  the  legislature  may  make  it  such/'^  "The 
matter  of  regulating  and  prohibiting  private  banking,  and  all 
banking  not  expressly  authorized  by  law,  is  strictly  within  the 
legislative  discretion,  under  that  branch  of  the  police  power 
relating  to  the  public  safety,  and  *  *  *  the  courts  will 
not  interfere  and  declare  such  legislation  unconstitutional  as 
an  evasion  of  individual  rights."  ^^ 

Order  of  Treatment 

The  fundamental  part  of  the  law  relating  to  banks  and 
banking  concerns  the  business  of  banking  in  all  the  various 
kinds  of  transactions  between  banks  and  those  dealing  with 


499,  36  Pac.  1115,  24  L.  R.  A.  854 ;  Cunuuings  v.  Spaunliorst,  5  Mo. 
App.  21 ;  People  v.  Utica  Ins.  Co.,  15  Johns.  (N.  Y.)  358,  8  Am.  Dec- 
243 ;  People  v.  Bartow,  6  Cow.  (N.  Y.)  290 ;  Chapman  v.  Lj-nch,  15© 
N.  Y.  551,  51  N.  E.  275;  State  v.  Strnble,  19  S.  D.  646,  104  N.  W.  465; 
State  V.  Williams,  8  Tex.  255 ;  McLaren  v.  State,  141  Wis.  577,  124  K.. 
W.  667,  135  Am.  St.  Rep.  55.  See  "Banks  and  Ranlcincj"  Dec.  Dvj^ 
{Key  ^^0.)  §  3;  Cent.  Dig.  §  9. 

17  Noble  State  Bank  v.  Haskell,  219  U.  S.  104.  31  Sup.  Ct.  186,  55 
L.  Ed.  112,  32  L.  R.  A.  (N.  S.)  1062;  Shallenberger  v.  First  State 
Bank  of  Holstein,  Neb.,  219  U.  S.  114,  31  Sup.  Ct.  189,  55  L.  Ed.  117 ; 
State  ex  rel.  Goodsill  v.  Woodmansee,'l  N.  D.  246,  46  N.  W.  970,  11 
L.  R.  A.  420 ;  Weed  v.  Bergh,  141  Wis.  569,  124  N.  W.  664,  25  L.  R. 
A.  (N.  S.)  1217.  See,  also,  State  v.  Stebbins,  1  Stew.  (Ala.)  299; 
Nance  v.  Hemphill,  1  Ala.  551;  People  v.  Utica  Ins.  Co.,  15  Johns. 
(N.  Y.)  358,  8  Am.  Dec.  243;  Morse,  Banks  &  B.  (4th  Ed.)  §  13. 
Contra:  State  v.  Scougal,  3  S.  D.  55,  51  N.  W.  858,  15  L.  R.  A.  477, 
44  Am.  St.  Rep.  756;  Marymout  v.  Nevada  State  P.anking  Board 
(Nev.)  Ill  Pac.  295,  32  L.  R.  A.  (N.  S.)  477.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  3;  Cent.  Dig.  §  9. 

18  State  ex  rel.  Goodsill  v.  Woodmansee,  1  N.  D.  246,  46  N.  W.'97U, 
11  L.  R.  A.  420.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  S.; 
Cent.  Dig.  §  9. 


10  INTRODUCTORY  (Ch.  1 

them.  Whether  the  bank  be  a  national  bank,  a  state  bank, 
an  individual,  or  a  firm  is  a  subordinate  matter.  The  busi- 
ness done  by  all  may  be  exactly  the  same,  and  it  is  done 
in  substantially  the  same  way.  The  legal  questions  arising  out 
of  such  business  constitute  the  great  bulk  of  the  law  of  bank- 
ing, and  are  but  little  affected!  by  special  regulations,  restric- 
tions, and  considerations  applicable  to  particular  kinds  of 
banks.  This  fundamental  part  of  the  law  will,  therefore,  be 
first  discussed.  The  law  in  its  particular  application  to  bank- 
ing corporations  will  be  made  the  subject  of  later  chapters. 


§§  4^6)  DEPOSITS  11 


CHAPTER  II 
DEPOSITS 

4.  Kinds  of  Deposits— General  Deposit. 

5.  Special  Deposit. 

6.  Deposit  for  Specific  Purpose. 

7.  Receipt  and  Entry  of  General  Deposits— By  Whom  Received. 
S.  Entry  m  I'ass  Book. 

9.     Deposit  of  Paper— Deposit  for  Collection, 

10.  Sale  or  Deposit  for  Collection. 

11.  Check  on  Depository. 

12.  Title  to  and  Disposition  of  General  Deposits— In  General. 

13.  Deposit  by  Trustee. 

14.  Deposit  by  Agent. 

15.  Deposit  in  Name  of  Third  Person. 

16.  -  Assignment,   Attachment,  etc. 

17.  Payment — In  General. 
IS.  Interest. 

19.     Bank's  Lien  or  Right  of  Set-Off— In  General. 

liO.  Deposit  Made  and  Debt  Owing  In  Different  Capacities, 

21.  Right  of  Surety  to  Have  Deposit  Applied. 

22.  Set-OflC  by  Depositor. 

2;i.     Certificate  of  Deposit — Definition  and  Effect. 

24.  Necessity  of  Demand. 

25.  Overdrafts. 

26.  Statement  of  Account— Effect. 

27.  Duty  of  Depositor. 

28.  Action  for  Deposit — Demand  and  Limitation. 

29.  Burden  of  Proof. 

KINDS  OF  DEPOSITS 

4.  GENERAL  DEPOSIT — Where  money  is  received  by  a 
bank  from  a  customer  upon  an  agreement,  express 
or  implied,  that  the  bank  may  mingle  the  money 
with  its  own  funds  and  shall  repay  upon  demand 
or  order  an  equivalent  amount,  the  transaction  is 
termed  a  "general  deposit."  In  such  case  the  re- 
lation between  the  bank  and  its  customer  is  that 
of  debtor  and  creditor. 


12  DEPOSITS  (Ch.  2 

5.  SPECIAL    DEPOSIT— Where    money    or    any    other 

thing  is  received  by  a  bank  for  safe-keeping  and 
return  of  the  identical  money  or  thing,  the  trans- 
action is  termed  a  "special  deposit,"  In  such  case 
the  relation  between  the  bank  and  the  depositor  is 
that  of  bailee  and  bailor.  "Where  the  bailment  is 
gratuitous,  the  bank  is  liable  only  for  such  loss  as 
results  from  its  gross  negligence. 

6.  DEPOSIT  FOR  SPECIFIC  PUPvPOSE— Where  money 

is  received  by  a  bank,  not  for  deposit  on  general 
account  or  for  safe-keeping  and  return,  but  to  ap- 
ply to  a  specific  purpose,  the  transaction  is  often 
termed  a  "specific  deposit."  In  such  case,  although 
the  money  is  to  be  mingled  with  the  bank's  own 
funds,  it  is  generally,  but  not  universally,  held  that 
the  bank  holds  the  deposit  or  fund  as  a  trustee. 

General  Deposit — Relation,  Betzveen  Bank  and  Depositor 

As  has  already  been  explained,  the  receiving  of  general 
deposits  is  an  essential  function  of  modern  banking.^  The 
deposits,  indeed,  furnish  the  principal  fund  with  which  the 
business  is  carried  on,  even  in  the  'case  of  banks  that  issue 
bank  notes. 

From  the  nature  of  banking,  which  contemplates  the  em- 
ployment by  the  bank  of  the  funds  of  many  persons  in  the 
making  of  loans  and  discounts  and  the  other  activities  of  the 
bank,  it  must  have  the  right  to  mingle  the  general  deposits  in 
a  common  fund,  together  with  the  moneys  it  may  derive  from 
its  capital  and  other  sources.  Moneys  received  by  the  bank  on 
general  deposit,  therefore,  pass  into  its  ownership,  and  the  re- 
lation created  thereby  between  the  bank  and  the  depositor  is 
in  no  sense  fiduciary,  but  is  merely  that  of  debtor  and  cred- 
itor. The  depositor  has  the  right  to  demand,  not  the  specific 
coins  or  notes  deposited,  but  an  equivalent  amount  of  money. - 

1  Ante,  p.  4. 

2  Foley  V.  Hill.  2  II.  L.  Cas.  278;  Marine  Bank  v.  Fulton  County 
Rank.  2  Wall.  252.  17  L.  Ed.  is,-, ;  National  Bank  of  the  Republic  v. 


§§  4-6)  KINDS   OF   DEPOSITS  13 

"Money,  when  paid  into  a  bank,"  it  was  said  in  a  leading  case, 
"ceases  altogether  to  be  the  money  of  the  principal.  It  is 
then  the  money  of  the  banker,  who  is  bound  to  return  an 
equivalent  by  paying  a  similar  sum  to  that  deposited  with  him 
when  he  is  asked  for  it.  The  money  paid  in  to  the  banker 
is  money  known  by  the  principal  to  be  placed  there  for  the 
purpose  of  being  under  the  control  of  the  banker.  It  is  then 
the  banker's  money.  He  makes  what  profit,  of  it  he  can,  which 
profit  he  retains  to  himself,  paying  back  only  the  principal, 
according  to  the  custom  of  bankers  in  some  places,  or  the 
principal  and  a  small  rate  of  interest,  according  to  the  cus- 
tom of  bankers  in  other  places.  The  money  placed  in  the  cus- 
tody of  a  banker  is,  to  all  intents  and  purposes,  the  money 
of  the  banker,  to  do  with  as  he  pleases.  He  is  guilty  of  no 
breach  of  trust  in  employing  it.  He  is  not  answerable  to  the 
principal  if  he  puts  it  in  jeopardy.  If  he  engages  in  a  hazard- 
ous speculation,  he  is  not  bound  to  keep  it  or  deal  with  it  as 
the  property  of  his  principal ;  but  he  is,  of  course,  answer- 
able for  the  amount,  because  he  has  contracted,  having  re- 
ceived that  money,  to  repay  to  the  principal,  when  demanded, 
a  sum  equivalent  to  that  paid  into  his  hands.  *  *  *  That 
being  established  to  be  the  relative  situation  of  the  banker 
and  customer,  the  banker  is  not  an  agent  or  factor,  but  a 
debtor."  ^ 

Millard,  10  Wall.  152,  19  L.  Ed.  897;  Balbucli  v.  Frelingliuysen  (C. 
C.)  15  Fed.  675 ;  In  re  Salmon  (D.  C)  145  Fed.  649 ;  Collins  v.  State, 
33  Fla.  429,  15  South.  214 ;  McGregor  v.  Battle,  128  Ga.  577,  58  S.  E. 
28,  13  L.  R.  A.  (N.  S.)  185 ;  Union  Nat.  Bank  v.  Citizens'  Bank,  153 
Ind.  44,  54  N.  E.  97 ;  Taft  v.  Quinsigamond  Nat.  Bank,  172  Mass. 
363,  52  N.  E.  387 ;  Neply  v.  Hood,  54  Mioh.  134,  19  N.  W.  920.  52  Am. 
Rep.  802;  Bank  of  Marysville  v.  Windish-Muhlhauser  Brewing  Co., 
50  Ohio  St.  151,  .••.3  N.  E.  1054,  40  Am.  St.  Rep.  600 ;  Bank  of  Black- 
well  V.  Dean,  9  Okl.  626,  60  Pac.  227;  In  re  Brudeutial  Trust  Co."s 
Assigumenf,  223  Pa.  409,  72  Atl.  798;  l»endleton  v.  Commonwealth, 
110  Va.  229,  65  S.  E.  536;  Killen  v.  Barnes,  106  Wis.  546,  82  N.  W. 
536.  See  "Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  119;  Cent.  Dig. 
§§  2S9-292. 

3  Foley  V.  Hill,  2  H.  L.  Cas.  278,  per  Lord  Cottenham.    8cc  "Banks 
and  Hanking,"  Dec.  Dig.  {Key  No.)  §  119;  Cent.  Dig.  §S  289-292. 


14  DEPOSITS  (Ch.  2 

Same — Payment  of  Deposits 

It  is  the  right  of  the  depositor  to  receive  payment  upon  de- 
mandl,  unless  the  agreement  to  that  effect  which  is  otherwise 
implied  is  varied  by  special  agreement.*  Usually  the  deposi- 
tor's demand  is  made  by  drawing  an  order  upon  the  bank, 
in  the  form  of  a  check,  for  the  payment  of'  the  whole  or  a 
part  of  the  amount  to  himself,  or  to  some  other  designated 
person,  or  to  the  order  of  such  person,  or  to  bearer ; '  and 
the  bank's  honor  of  the  check  is  a  payment  of  its  indebtedness 
to  that  amount.  The  indebtedness  of  a  bank  to  a  customer  is 
thus  a  constantly  varying  amount,  from  time  to  time  increased 
by  fresh  deposits,  and  decreased  by  payment  of  his  checks. 
Sometimes,  however,  the  implied  agreement  may  be  varied  by 
the  issue  by  the  bank  to  the  depositor  of  a  certificate  of  de- 
posit, making  the  entire  amount  payable  either  on  demand  or 
at  a  designated  time,  to  the  depositor  or  to  his  order.®  In 
this  case  the  amount  due  is  payable  only  upon  surrender  of 
the  certificate  to  the  bank,  and  the  deposit  is  not  subject  to 
check." 

The  rights  of  the  depositor  are  merely  those  of  a  creditor. 
If  the  bank  without  his  authorization  pays  out  money  and 
charges  it  to  his  account,  he  cannot  follow  the  money  and  re- 
claim it  in  the  hands  of  the  person  to  whom  it  was  paid,  even 
if  the  latter  had  notice  that  the  payment  was  unauthorized; 
since  the  bank  has  a  right  to  pay  its  own  money  to  whomso- 
ever it  may  choose,  and  its  indebtedness  to  the  depositor  is 
not  discharged  by  an  unauthorized  payment.^  So,  in  the 
event  of  the  bank's  failure,  the  depositor  is  entitled  to  no  pref- 
erence over  the  other  general  creditors ;  ®  although  if  the  bank 
received  the  deposit  with  knowledge  of  its  insolvency  it  holds 


4  Post,  p.  75.  «  Post,  p.  75. 

6  Post,  p.  96.  7  Post,  p.  75. 

8  Davis  V.  Smith,  29  Minn.  201.  12  N.  W.  5:31 ;  post,  p.  148.  See 
"Bank^  and  Banhmg;'  Dec.  Dig.  {Key  No.)  §§  129,  133;  Cent.  Dig.  §§ 
Sli,  .339-352. 

»Post,  p.  349. 


§.5  4-6)  KIND      OF    DEPOSITS  15 

the  money  as  trustee,  and  the  depositor  may  follor^the  fund 
if  it  can  be  identified  and  recover  it  from  the  receiver  or  as- 
signee.^" 

Same — Duty  to  Receive  Deposits 

It  is  almost  superfluous  to  say  that  the  right  to  receive  de- 
posits, even  in  the  case  of  a  banking  corporation  deriving  its 
banking  powers  from  its  charter,  does  not  imply  a  correspond- 
ing duty  to  receive  deposits. ^^  A  bank  may  decline  to  do  busi- 
ness with  those  whom,  for  any  reason,  it  does  not  wish  to 
serve,  and  may  close  an  account  at  any  time  by  tendering  to 
the  depositor  the  amount  due  and  declining  to  receive  more.^'^ 

Special  Deposits 

In  the  case  of  a  special  deposit,  the  identical  money  or  other 
thing  deposited  is  to  be  returned,  and  the  bank  consequently 
does  not  acquire  the  ownership  in  the  thing,  but  is  merely 
intrusted  with  its  temporary  custody  for  safe-keeping.  The 
relation  between  the  bank  and  the  special  depositor  is  there- 
fore not  that  of  debtor  and  creditor,  but  of  bailee  and  bailor.^ ^ 


10  Post,  p.  349. 

11  Thatcher  v.  Bank  of  State  of  New  York,  5  Saiulf.  (N.  Y.)  121. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  120;  Cent.  Dig.  § 
293. 

12  Munn  V.  Burch,  25  111.  35;  Chicago  Marine  &  Fire  Ins.  Co.  v. 
Stanford,  28  III.  IGS,  81  Am.  Dec.  270 ;  Elliott  v.  Capital  City  State 
Bank.  128  Iowa,  275,  103  N.  W.  777,  1  L.  R.  A.  (N.  S.)  1130,  111  Am. 
St.  Rep.  198.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §.§  120, 
133;    Cent.  Dig.  §§  293,  339-352. 

13  See  Marine  Bank  v.  Fulton  County  Bank,  2  Wall.  2.^>2,  17  L.  Ed. 
785 ;  First  Nat.  Bank  v.  Graham,  100  U.  S.  G99,  25  L.  Ed.  7.50 ;  Pres- 
ton V.  Prather,  137  U.  S.  G04,  11  Sup.  Ct.  162,  34  L.  Ed.  788;  First 
Nat.  Bank  of  Decatur  v.  Henry,  159  Ala.  3G7,  49  South.  97 ;  Alston  v. 
State,  92  Ala.  124,  9  South.  733,  13  L.  R.  A.  Go9 ;  Chattahoochee  Nat. 
Bank  v.  Schley,  58  Ga.  .309;  McLain  v.  Wallace,  103  Ind.  .562,  5  N. 
E.  911;  Butcher  v.  Butler,  134  Mo.  61,  114  S.  W.  564;  Pattison  v. 
Syracuse  Nat.  Bank,  80  N.  Y.  82,  36  Am.  Rep.  .582.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §§  119,  153;  Cent.  Dig.  §§  2S9,  4S3-301. 


IG  DEPOSITS  (Ch.  2 

Same — Poz^'cr  of  Incorporated  Bank  to  Receive 

The  receiving  of  special  deposits  is  not  strictly  a  banking 
operation,  and  the  deposit  in  such  case  is  made  with  the  bank, 
not  because  it  is  a  bank,  but  because  it  owns  a  strong  vault. ^* 
This  has  led  some  courts  to  question  or  deny  the  power  of  a 
banking  corporation  to  receive  special  deposits  where  the 
power  is  not  expressly  conferred,^^  and  on  that  ground  to 
hold  that  national  banks  do  not  possess  the  power. ^®  That 
national  banks  do  possess  the  power  is  no  longer  open  to  ques- 
tion.^^  And  the  authorities  overwhelmingly  support  the  rule 
that  if  a  bank  be  accustomed  to  take  such  deposits,  and  this  is 
known  to  and  acquiesced  in  by  the  directors,  and  the  property 
deposited  is  lost  by  the  gross  carelessness  of  the  bailee,  a  lia- 
bility ensues  in  like  manner  as  if  the  deposit  had  been  au- 
thorized by  the  terms  of  the  charter.^  ^ 

14  Duubar,  Theory  &  History  of  Banking,  14. 

15  First  Nat.  Bank  of  Manhattan  v.  Citizens'  Bank  of  Topeka,  Fed. 
Cas.  No.  4,802.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  120, 
153;  Cent.  Dig.  §§  293,  .',83-501. 

16  Wiley  V.  First  Nat.  Bank  of  Brattleboro.  47  Vt.  546,  19  Am. 
Rep.  122;  Whitney  v.  First  Nat.  Bank  of  Brattleboro,  50  Vt.  3S9, 
28  Am.  Rep.  503.  See,  also.  First  Nat.  Bank  of  Lyons  v.  Ocean 
Nat.  Bank,  60  N.  Y.  278,  19  Am.  Rep.  181.  See  "Banks  and  Bank- 
ing," Cent.  Dig.  §  1007. 

17  The  provision  of  Rev.  St.  U.  S.  §  5228  (U.  S.  Comp.  St.  1901, 
p.  3506),  that  it  shall  be  lawful  for  the  bank  after  failure  to  "de- 
liver special  deposits"  is  a  recognition  of  its  power  to  receive 
them.  First  Nat.  Bank  v.  Graham,  100  U.  S.  699,  25  L.  Ed.  750; 
First  Nat.  Bank  of  Monmouth  v.  Strang,  138  111.  347,  27  N.  E. 
903 ;    First  Nat.  Bank  of  Mansfield  v.  Zent,  39  Ohio  St.  105. 

Under  Code  Iowa,  §  1841,  providing  that  savings  banks  may 
receive  on  deposit  the  savings  and  funds  of  others,  preserve  and  in- 
vest the  same,  etc.,  a  savings  bank  has  power  to  receive  a  special 
deposit  of  securities  for  safe-keeping.  Sherwood  v.  Home  Sav.  Bank, 
131  Iowa,  528,  109  N.  W.  9.  Sec  "Banks  and  Banking,"  Cent.  Dig. 
§  1007. 

18  First  Nat.  Bank  v.  Graham,  100  U.  S.  699,  25  L.  Ed.  750; 
Chattahoochee  Nat.  Bank  v.  Schley,  58  Ga.  369;  Foster  v.  Presi- 
dent,  etc.,   of   Essex   Bank,  17  Mass.   479,  9  Am.   Dec.   168;    Patti- 


§§  4-6j  KINDS   OF    DEPOSITS  17 

Same — Liability  of  Bank  -*—  r 

Usually  in  the  case  of  a  special  deposit  received  by  a  bank 
the  bailment  is  gratuitous,  and  it  is  therefore  laid  down  that 
the  bank  is  liable  for  such  loss  only  as  results  from  its  gross 
negligence.^"  Gross  negligence  has  been  defined  as  absence 
or  want  of  slight  care  or  diligence,  and,  applying  this  stand- 
ard, some  cases  have  declared  that  it  is  sufficient  if  the  bank 
employs  the  same  care  which  the  most  inattentive  persons 
take.-"  The  better  rule  is  that  a  bank  which  receives  a  spe- 
cial deposit  is  bound  to  exercise  over  it  such  reasonable  care 
as  a  reasonably  prudent  and  careful  man  may  fairly  be  ex- 
pected to  take  of  his  own  property  of  similar  description.-' 
"What  will  constitute  such  reasonable  care  will  vary  with  the 
nature,  value,  and  situation  of  the  property,  the  general  pro- 
son  V.  Syracuse  Nat.  Bank,  80  N.  Y.  82,  36  Am.  Rep.  582;  Scott 
V.  National  Bank  of  Chester  Valley,  72  Pa.  471,  13  Am.  Rep.  711 ; 
First  Nat.  Bank  of  Carlisle  v.  Graham,  79  Pa.  106,  21  Am.  Rep.  49. 

Where  a  bank  was  broken  into  by  burglars,  and  property  of  its 
own  and  of  others  taken,  it  may  take  measures  to  recover  the 
property  for  those  jointly  concerned;  and  want  of  proper  dili- 
gence, skill,  and  care  in  the  performance  of  such  an  undertaking 
would  render  it  liable  in  damages  for  failure.  Wylie  v.  North- 
ampton Nat.  Bank,  119  U.  S.  361,  7  Sup.  Ct.  268.  30  L.  Ed.  455. 
See  "Bankfi  and  Banking;'  Dec.  Dig.  {Keg  So.)  §  153;  Cent.  Dig. 
§§  Jf83-501,  1001-lOli. 

19  See  cases  cited  in  preceding  note. 

2  0  First  Nat.  Bank  of  Allcntown  v.  Rex,  89  Pa.  308,  33  Am. 
Rep.  767.  See  "Banks  and  Banldng"  Dec.  Dig.  {Key  No.)  §  J53; 
Cent.  Dig.  §§  483-501,  1001-1012. 

2iGiblin  v.  Mc:Mullen,  2  L.  R.  P.  C,  317;  Preston  v.  Prather, 
137  U.  S.  004,  11  Sup.  Ct.  162,  34  L.  Ed.* 788;  First  Nat.  Bank  of 
Mansfield  v.  Zent,  30  Ohio  St.  105. 

A  bank  is  liable  if  it  is  negligent  in  delivering  a  special  deposit 
to  the  wrong  person.  Ganley  v.  Troy  City  Nat.  Bank,  OS  N.  Y. 
487;  r^ncaster  County  Nat.  Bank  v.  Smith,  62  Pa.  47;  Manhattan 
Bank  v.  Walker,  130  U.  S.  267,  9  Sup.  Ct.  519,  32  L.  Ed.  959;  Cf. 
Walker  v.  Manhattan  Bank  (C.  C.)  25  Fed.  247.  See  ''Banks  and 
Banking;'  Dec.  Dig.  {Key  Yo.)  §  153;  Cent.  Dig.  §§  1,83-501,  1001- 
1012. 

Tiff.Bks.&  B.— 2 


18  DEPOSITS  (Ch.  2 

tection  afforded  by  the  police  of  the  community  against  violence 
and  crime,  and  the  bearing  of  surrounding  circumstances  upon 
its  security.  *  *  *  Gross  negligence  in  such  cases  is  noth- 
ing more  than  a  failure  to  bestow  the  care  which  the  property 
in  its  situation  demands."  ^^ 

The  question  of  the  bank's  liability  has  frequently  been 
raised  by  the  theft  or  embezzlement  of  a  cashier  or  other  offi- 
cer of  the  bank.  In  some  cases  it  has  been  held  that  the 
bank  was  not  liable,  upon  the  ground  that  the  act  of  the  offi- 
cer was  not  one  committed  while  acting  within  the  scope  of 
his  authority.^^  These  cases  have  been  justly  criticised  so 
far  as  they  hold  that  the  bank  is  exempt  from  liability  for 
the  fraudulent  act  of  an  employe  whose  employment  embraces 
a  supervision  of  its  property.^*  Later  cases  impose  upon  the 
bank  the  duty  of  taking  such  measures  as  will  ordinarily  se- 
cure the  property  from  burglars  outside  and  thieves  within, 
and  of  employing  fit  men  for  the  discharge  of  their  duties,  and 
of  removing  an  employe  upon  notice  of  his  untrustworthi- 
ness,  and  hold  the  bank  liable  for  a  loss  that  results  from  fail- 
ure so  to  do.^** 

22  Preston  v.  Prather,  137  U.  S.  604,  11  Sup.  Ct.  162,  34  L.  Ed. 
788.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  153;  Cent. 
Dig.  §§  483-501,  1001-1012. 

2  3  Foster  v.  President,  etc.,  of  Essex  Bank,  17  Mass.  479,  9  Am. 
Dec.  168;  Scott  v.  National  Bank  of  Cliester  Valley,  72  Pa.  471, 
13  Am.  Rep.  711.     See,  also,  Giblin  v.  :McMulleu,  2  L.  R.  P.  C.  317. 

A  bank  is  liable  to  a  special  depositor  for  the  loss  of  bis  deposit 
through  its  diversion  by  its  officers.  El  Paso  Nat.  Bank  v.  Fuchs 
(Tex.  Civ.  App.)  34  S.  W.  203.  -See  "Banks  and  Banking;'  Dec.  Dig. 
{Key  No.)  §  153;    Cent.  Dig.  §§  4S3-501,  1001-1012. 

2  4  See  opinion  of  Field,  J.,  in  Preston  v.  Pi-ather,  137  U.  S.  604, 
11  Sup.  Ct.  163,  34  L.  Ed.  788,  criticising  Foster  v.  President,  etc., 
of  Essex  Bank,  17  Mass.  479,  9  Am.  Dec.  16S,  and  Scott  v.  National 
Bank  of  Chester  Valley,  72  Pa.  471,  13  Am.  Rep.  711.  Cf.  Smith  v. 
First  Nat.  Bank  in  Westfield,  99  Mass.  605,  97  Am.  Dec.  59.  See 
"Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  153;  Cent.  Dig.  §§ 
483-501,  1001-1201. 

2  5  In  an   action  against  private  bankers  to  recover  the  value  of 


§§  4-6)  KINDS  OF   DEPOSITS  19 

A  bank  may  of  course  render  itself  responsible  in  any  event 
by  a  special  contract  with  the  depositor.^' 

Same — Collateral  Security,  etc. 

Where  a  deposit  is  made  with  a  bank,  not  merely  for  safe- 
keeping, but  as  collateral  security  for  a  loan  or  an  overdraft, 
or  for  some  other  purpose  in  which  the  bank  has  a  direct  in- 
terest, the  bailment  not  being  gratuitous,  a  more  stringent  ob- 
ligation is  said  to  be  imposed.  In  such  case,  it  is  said,  the 
bank  must  exercise  the  same  care  and  diligence  that  a  prudent 
owner  would  exercise  over  his  own  property  of  a  similar 
kind.^''  The  same  rule  applies  to  paper  deposited  for  col- 
lection.^^ 

bonds  placed  with  them  as  a  special  deposit,  and  stolen  by  an 
absconding  cashier,  it  appeared  that,  about  a  year  before  his  flight, 
the  managing  partner  became  aware  that  he  had  been  speculating, 
and,  on  charging  him  therewith,  was  told  that  he  was  not  doing 
so  then,  and  would  not  thereafter;  that  no  efforts  were  made  to 
verify  his  statements,  or  ascertain  whether  he  had  used  property 
not  his  own;  that  later  it  was  learned  that  he  had  been  speculat- 
ing again,  but  he  stated  that  these  were  deals  for  friends,  and 
were  closed;  that  an  examination  of  the  books  and  securities, 
though  not  of  the  special  deposits,  was  then  made,  but  the  cashier 
was  retained.  Held,  that  this  was  gross  negligence,  and  defend- 
ants were  liable,  whether  regarded  as  gratuitous  bailees  or  bailees 
for  hire.  Preston  v.  Trather,  137  U.  S.  G04,  11  Sup.  Ct.  1G2,  34 
L.  Ed.  788.  See,  also,  Merchants'  Nat.  Bank  of  Savannah  v.  Car- 
hart,  95  Ga.  394,  22  S.  E.  628,  32  L.  R.  A.  775,  51  Am.  St.  Rep. 
95 ;  Gray  v.  Merriam,  148  111.  179,  -35  N.  E.  810,  32  L.  R.  A.  709, 
39  Am.  St.  Rep.  172;  Sherwood  v.  Home  Sav.  Bank,  131  Iowa, 
528,  109  N.  W.  9.  Cf.  Town  of  Fairfield  v.  Southport  Nat.  Bank, 
80  Conn.  92,'  67  Atl.  471.  See  ''Banks  and  Banking,"  Dec.  Dig. 
(Key  A"o.)  §  153;    Cent.  Dig.  §§  J,83-501,  1001-1012. 

2  6  Hale  V.  Rawallie,  8  Kan.  136;  Maury  v.  Coyle,  34  Md.  23.1. 
See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  153;-  Cent.  Dig. 
§§  4S3-501,  1001-1012. 

2  7  Preston  v.  Prather  137  U.  S.  604,  11  Sup.  Ct.  162,  34  L.  Ed. 

2  8  First  Nat.  Bank  of  Birmingham  v.  First  Nat.  Bank  of  New- 
port, 116  Ala.  520,  22  South.  976.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §§  153,  156;    Cent.  Dig.  §§  J,83-501,  539-5J,6. 


20  DEPOSITS  (Ch.  2 

Deposit  for  Specific  Purpose 

\\'here  a  deposit  is  made  with  the  understanding  that  the 
bank  is  to  apply  it  to  a  specific  purpose,  as  to  pay  it  to  a  des- 
ignated person,  or  to  pay  a  certain  note,  or  to  remit,  the  trans- 
action is  sometimes  called  a  specific  deposit,-^  bur  more  often 
misleadingly,  a  special  deposit.^ ° 

It  is,  of  course,  the  duty  of  the  bank  to  obey  the  instruc- 
tions of  the  depositor,  which  indicate  the  purpose  to  which  the 
deposit  is  to  be  applied.^^  If  a  deposit  of  money  be  upon  such 
terms  that  the  bank  is  not  permitted  to  mingle  it  with  its 
own  funds,  it  is  clear  that  it  is  not  an  asset  of  the  bank,  but 
that  a  trust  relation  is  established,  and  that,  if  the  bank  min- 
gles the  money  with  its  own  funds,  the  depositor  or  the  benefi- 

788;  Gray  v.  Merriam,  148  111.  179,  35  N.  E.  810.  32  L.  R.  A.  769, 
,39  Am.  St.  Rep.  172;  Third  Nat.  Bank  of  Baltimore  v.  Boyd,  44 
Md.  47,  22  Am.  Rep.  35 ;  Ouderkirk  v.  Central  Nat.  Bank  of  Troy, 
119  N.  Y.  203,  23  N.  E.  875.  See,  also,  Jenkins  v.  National  Village 
Bank  of  Bowdoinham,  58  Me.  275;  Dearborn  v.  Union  Nat.  Bank 
of  Brunswick,  61  Me.  369.  Sec  "Banks  and  Banking,"  Dec.  Dig. 
{Key  yo.)  §  119;    Cent.  Dig.  §  683. 

2  9  The  power  to  receive  specific  deposits  is  incidental  to  the 
ordinary  banking  business.  Kansas  ^Nat.  Bank  v.  Quinton.  57 
Kan.  750,  48  Pac.  20 ;  American  Nat.  Bank  of  Arkansas  City  v.  Pres- 
nall,  58  Kan.  69,  48  Pac.  556.  See  "Banks  and  Banking"  Dec. 
Dig.  (Key  No.)  §  120;    Cent.  Dig.  §§  293-302. 

30  See  Brahm  v.  Adkins,  77  111.  203 ;  National  Bank  of  Fishkill 
V.  Speight,  47  N.  Y.  668;  Parker  v.  Hartley,  91  Pa.  465;  Fort  v. 
Fir.st  Nat.  Bank  of  Bateburg,  82  S.  C.  427,  64  S.  E.  405.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  153;  Cent.  Dig.  §§  JtS3-501, 
1001-1012. 

31  See  Drovers'  Nat.  Bank  v.  O'llare,  119  111.  646.  10  N.  E.  .360: 
American  Exch.  Nat.  Bank  v.  Loretta  Gold  &  Silver  Mining  Co., 
165  111.  103,  46  N.  E.  202,  ,56  Am.  St.  Rep.  2,33;  Parker  v.  Hartley, 
91  Pa.  465;  Bank  of  British  North  America  v.  Cooper,  137  U,  S, 
473,  11  Sup.  Ct.  160,  34  L.  Ed.  759. 

The  bank  does  not  have  a  lien  or  right  of  set-off  as  with  a  gen- 
eral deposit,  Wagner  v.  Citizens'  Bank  &  T,  Co,,  122  Tenn.  164, 
122  S.  ^A^  245,  135  Am.  St.  Rep.  869.  Post,  p.  61,  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  153;  Cent.  Dig.  §§  JiS3-501,  1001- 
1012. 


§§  4-6)  KINDS   OF   DEPOSITS  21 

ciary  under  the  a.^rcenieiil  may  follow  the  trust  Tuhd  and 
reclaim  it,  provided  it  can  be  identified.  On  the  other  hand, 
if  the  deposit  be  upon  such  terms  that  it  may  be  mingled  with 
the  bank's  funds,  the  identity  of  the  deposit  is  lost,  and,  not- 
withstanding that  it  is  to  be  applied  according  to  an  agree- 
ment, and  is  not  to  be  drawn  upon  by  the  depositor,  like  a 
general  deposit,  it  seems  that  a  strict  trust  is  not  established, 
since  there  is  no  definite  res,  but  that  the  rights  of  the  de- 
positor and  the  beneficiary  are  merely  contractual.^-  Where, 
for  example,  money  is  deposited  for  the  purpose  of  paying 
the  indebtedness  of  a  third  person,  if  no  contrary  instruc- 
tions are  given,  it  is  customary  to  mingle  the  money  wath  the 
funds  of  the  bank,  and  upon  principle  it  seems  that  the  bank 
is  to  be  regarded  as  the  debtor  of  the  depositor.^ ^  In  this 
view,  neither  the  depositor  nor  the  beneficiary  under  the  agree- 
ment are  entitled  to  any  preference  over  other  creditors  if  the 
bank  fails  to  apply  the  funds  according  to  the  agreement.^- 

3  2  See  Butcher  v.  Butler,  134  Mo.  App.  61,  114  S.  W.  5G4.  See 
the  illuminating  notes,  explaining  the  nature  of  the  relation  created 
by  a  deposit  for  a  specific  purpose,  in  12  Harv.  Law  Rev.  221,  and 
16  Harv.  Law  Rev.  22S.  which  have  been  followed  in  the  text. 
Money  deposited  with  a  banker  to  secure  him  from  liability  on 
a  bond,,  and  mingled  with  the  other  funds  of  the  bank  with  the 
knowledge  of  the  depositor,  passes  to  the  banker's  assignee,  under 
a  general  assignment.  IMutual  Accident  Ass'n  of  the  Northwest 
v.  Jacobs,  141  111.  261,  31  N.  E.  415,  16  L.  R.  A.  516,  33  Am.  St. 
Rep.  302.  See  ''Banks  and  Banking,'"  Dec.  Dig.  {Keg  Xo.)  §  153; 
Cent.  Dig.  U  'iSS-oOl,  1007-1012. 

3  3  Morse,  Banks  &  B.  (4th  Ed.)  §  210. 

3  4  In  re  Barned's  Banking  Co.,  39  L.  J.  Ch.  635  (distinguishing 
Farley  v.  Turner.  26  L.  J.  Ch.  710) ;  In  re  Ilosie,  7  N.  B.  R.  601, 
Fed.  Cas,  No.  6,711. 

Where  a  corporation  agreed  to  keep  on  deposit  a  sum  sulli- 
cieut  to  protect  certain  shares  of  its  stock  deposited  as  collateral 
to  secure  loans  made  to  its  stockholders,  there  being  no  evidence 
that  the  dei)osit  was  special,  or  that  the  bank  was  not  to  use  it 
as  its  other  fuuds,  the  deposit  was  not  a  trust,  entitling  the 
depositor  to  a  preference.  State  Bldg.  &  Sav.  Ass'n  v.  Mechanics' 
Savings  Bank  &  Trust  Co.  (Tenn.  Ch.)  36  S.  W.  067.     F^rr  "Bauk.^ 


22  DEPOSITS  (Ch.  2 

The  fact,  however,  that  the  relation  is  more  than  that  of  debt- 
or and  creditor,  in  that  the  bank  undertakes  the  duty  of  apply- 
ing the  deposit,  has  led,  or  misled,  the  courts  generally  into 
holding  that  a  trust  relation  is  established,  whereby  the  bank 
holds  the  deposit  or  fund  as  trustee,  and  that  upon  the  bank's 
insolvency,  provided  the  deposit  can  be  traced  into  assets 
which  have  come  into  the  hands  of  a  receiver  or  assignee,  the 
depositor  or  the  beneficiary,  as  the  case  may  be,  is  entitled 
to  a  preference  over  the  general  creditors. ^^ 

and  Banking,"  Dec.  Dig.  {Key  ^^o.)  §  153;  Cent.  Dig.  §S  .',83-501, 
1007-1012. 

35  Woodhouse  v.  Crandall,  197  111.  104,  64  N.  E.  292.  58  L.  R.  A. 
385;  Shopert  v.  Indiana  Nat.  Bank,  41  Ind.  App.  474.  83  N.  E.  515 -. 
Whitcomb  v.  Carpenter.  1.34  Iowa,  227,  111  N.  W.  825,  10  L.  R.  A. 
(N.  S.)  928;  Peak  v.  Ellicott,  Assignee,  30  Kan.  156,  1  Pac.  499, 
46  Am.  Rep.  90;  People  v.  City  Bank  of  Rochester,  90  N.  Y.  32; 
Farmers'  &  Mechanics'  Nat.  Bank  v.  King.  57  Pa.  202,  98  Am. 
Dec.  215 ;  Massey  v.  Fisher  (C.  C.)  62  Fed.  958 ;  Moreland  v.  Brown. 
86  Fed.  257,  30  C.  C.  A.  23.  A  tenant  deposited  money  to  be  held 
by  the  bank  as  security  to  the  landlord  for  performance  of  his 
lease,  the  bank  to  pay  to  the  landlord  such  portion  thereof  as 
would  satisfy  any  damages  he  might  sustain  by  the  tenant's  de- 
fault, and  after  a  certain  time  to  hold  the  same  to  the  credit  of 
the  landlord  and  to  pay  to  him  in  monthly  installments.  Held, 
that  the  deposit  created  a  trust  fund,  and  that  the  landlord  could 
follow  and  recover  it  from  the  bank's  receiver  in  preference  to  the 
general  creditors.  Woodhouse  v.  Crandall,  197  111.  104,  04  N.  E. 
292,  58  L.  R.  A.  385. 

In  Farley  v.  Turner,  26  L.  J.  Ch.  710,  a  country  bank  received 
from  a  customer  money  with  instructions  to  pay  a  certain  bill 
accepted  by  him  and  payable  at  R.  &  Co.'s  in  London.  The  bank 
caused  money  to  be  paid  to  R.  &  Co.  to  meet  the  bill,  who  accepted 
the  money  for  that  purpose,  but,  upon  hearing  that  the  country 
bank  had  stopped  payment,  failed  to  pay  the  bill.  It  was  held 
that,  the  money  having  been  placed  with  the  country  bank  to  be 
applied  to  a  particular  purpose,  the  money  paid  to  R.  &  Co.  belonged 
specifically  to  the  cu.stomer  and  not  to  the  general  creditors  of  the 
country  bank. 

In  Montagu  v.  Pacific  Bank  (C.  C.)  81  Fed.  602,  upon  somewhat 
similar  facts,  a  similar  result  was  reached;    Farley  v.  Turner  be- 


§§  4-6)  KINDS  OF   DEPOSITS  23 

Character  of  Deposits — Hozv  Determined  ""^ 

Whether  a  deposit  is  general  or  special,  as  well  as  whether 
it  is  specific,  is  to  be  determined  by  the  agreement  of  the 
parties,  express  or  implied.  The  nature  of  the  deposit  may, 
of  course,  show  that  it  is  special,  as  plate,  or  securities,  or 
money  in  a  box  or  sealed  package.^*  It  will  be  inferred  that 
a  deposit  of  money  is  general,  in  the  absence  of  evidence  that 
it  is  intended  to  be  special  or  specific.^^     In  the  case  of  paper, 

ing  approved.     See  comment  on  this  case  in   11   Harv.  Law   Rev. 
202. 

In  re  Barned's  BanldnR  Co.,  30  L.  J,  Cii.  6.S.5,  money  was  paid 
into  a  banlv  for  a  special  purpose,  and  tbe  bank  stopped  payment 
before  so  applying  it.  The  court  distinguished  Farley  v.  Turner  on 
the  ground  that  there  the  country  bank  had  applied  the  money,  and  ' 
the  town  agent  had  received  it  for  that  purpose,  while  here  there 
was  no  application  of  the  money,  so  that  the  payer  had  no  lien, 
but  merely  a  right  to  prove  with  the  general  creditors  of  the  bank. 
See  "Banks  and  Banlhifir  Dec.  Dig.  (Key  No.)  §§  80,  153;  Cent. 
Dig.  §§  483-501,  1007-1012. 

36  Dawson  v.  Real  Estate  Bank,  5  Ark.  283;  Foster  v.  President, 
etc.,  of  Essex  Bank,  17  Mass.  479,  9  Am.  Dec.  168. 

A  depositor  who  receives  a  certificate  of  deposit,  and  who  draws 
part  and  requests  the  bank  to  put  the  balance  away  in  a  separate 
package,  is  not  entitled,  on  the  bank's  insolvency,  to  a  preference, 
though  the  bank  promised  to  do  so,  but  did  not.  Bayor  v.  Ameri- 
can Trust  &  Savings  Bank,  157  111.  62,  41  N.  E.  623.  .See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  153;    Cent.  Dig.  ^  Ji83-J,83. 

3  7  Alston  v.  State,  92  Ala.  124,  9  South.  732,  13  L.  R.  A.  0.j9  ; 
Schofield  Mfg.  Co.  v.  Cochran,  119  Ga.  901,  47  S.  E.  208;  Ward  v. 
Johnson,  95  111.  215 ;  Mutual  Ace.  Ass'n  of  the  Northwest  v.  Jacobs, 
141  111.  261,  31  N.  E.  414,  16  L.  R.  A.  516,  33  Am.  St.  Rep.  302; 
State  V,  Dickerson,  71  Ran.  769,  81  Pac.  497;  Butcher  v.  Butcher, 
134  Mo.  61,  114  S.  W.  564;  Nichols  v.  State,  46  Neb.  715,  05  N.  W. 
774;  Cragie  v.  Iladley,  99  N.  Y.  131,  1  N.  E.  537,  52  Am.  Rep.  9; 
J^lyers  v.  Twelfth  Ward  Bank,  28  Misc.  Rep.  188,  58  N.  Y.  Supp. 
10<)5;  Lennan  v.  Pollock  State  Bank,  21  S.  D.  511,  110  N.  W. 
834;  State  Bldg.  &  Sav.  Ass'n  v.  Mechanics'  Savings  Bank  &  Trust 
Co.  (Tenn.  Ch.)  30  S.  W.  967;  Dearborn  v.  Washington  Sav.  Bank 
13  Wash.  345,  42  Pac.  1107.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  153;   Cent.  Dig.  §§  J,83-J,85. 


24  DEPOSITS  (Ch.  2 

the  nature  of  the  deposit  may  be  indicated  by  its  being  cred- 
ited as  paper  or  as  cash.^* 


RECEIPT  AND  ENTRY  OF  GENERAL  DEPOSITS 

7.  BY  WHOM  RECEIVED— In  order  that  a  deposit  shall 

bind  the  bank,  it  must  be  made  with  an  officer  au- 
thorized to  receive  it. 

8.  ENTRY  IN  PASS  BOOK— An  entry  made  by  the  bank 

in  the  pass  book  of  a  depositor,  crediting  him  with 
the  amount  of  a  deposit,  is  in  the  nature  of  a  re- 
ceipt, and  may  be  varied  by  oral  evidence. 

Mode  of  Depositing — With  Whom 

A  deposit  must  be  made  with  an  officer  of  the  bank  who  is 
authorized  to  receive  it,  in  order  to  render  the  bank  liable 
thereon.^^  The  receiving  teller,  where  there  is  such  an  offi- 
cer, is  ordinarily  the  proper  person  to  whom  to  deliver  money 
for  general  deposit.  Delivery  to  the  receiving  teller,*"  or  to 
the  cashier,*^  or  to  the  president,*-  is  sufficient.  If  delivery 
is  made  to  some  other  officer,  in  order  to  charge  the  bank  it 
must  be  shown  that  he  had  authority,  either  express  or  im- 
plied, as  by  the  usage  of  the  bank,  or  from  the  circumstances 
surrounding  the  transaction,  to  receive  it.*^    Of  course,  if  the 

3  8  Post,  p.  34. 

3  9  Bickley  v.  Commercial  Bank,  39  S.  C.  281,  17  S.  E.  977,  39 
Am.  St.  Rep.  721 ;  Jumper  v.  Commercial  Bank,  39  S.  C.  296,  17 
S.  E.  980.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  121; 
Cent.  Dig.  §§  293-302. 

4  0  Post,  p.  327.  *i  Post,  p.  321. 

42  Hazleton  v.  Union  Bank  of  Coluuilms,  32  Wis.  34.  But  see, 
Bickley  v.  Commercial  Bank,  39  S.  C.  281,  17  S.  E.  977,  39  Am. 
St.  Rep.  721;  post,  p.  315.  See  ''Banks  and  Banking,"  Dec.  Dig. 
(Key  Xo.)  §  121;    Cent.  Dig.  §§  293-301. 

43  Terrell  v.  Branch  Bank  at  Mobile,  12  Ala.  502;  President,  etc.. 
of  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377,  4  Am.  Dec.  280; 
Thatcher   v.   Bank   of   State   of   New   York,    5   Sandf.    (N.    Y.)   121; 


§§7-8)       RECEIPT   AND    ENTRY    OF    GENERAL    DEPOSITS  25 

money  actually  reaches  the  proper  officer  and  is  credited  to 
the  depositor,  the  bank  is  liable."  The  deposit  must  be  made 
at  the  bank;*^  but  a  deposit  elsewhere  is  good,  if  the  bank 
receives  it  or  ratifies  it.** 

Entry  in  Pass  Book 

It  is  usual  for  the  customer  of  a  bank  to  have  a  bank  book 
or  pass  book,  and  to  present  it  when  making  a  general  de- 
posit, for  the  purpose  of  having  the  amount  and  date  of  the 
deposit  entered  by  the  receiving  teller  or  other  officer  receiv- 
ing it.  Such  entry  in  the  usual  form,  crediting  the  depositor, 
does  not  constitute  a  written  contract  between  the  parties,  but 
is  merelv  prima  facie  evidence,  in  the  nature  of  a  receipt  for 

Sterling  v.  Marietta  &  S.  Trading  Co.,  11  Serg.  &  K.  (Pa.)  179. 
See  Ilotclikiss  v.  Artisans'  Bank,  *41  N.  Y.  564.  See,  also.  Kelley 
V.  Chenango  A'alley  Savings  Bank,  22  App.  Div.  202,  47  N.  Y.  Supp. 
1041. 

Where  a  customer,  who  had  overdrawn  his  account,  received  a 
request  from  the  paying  teller  to  call,  and  at  his  request  paid  hiir 
over  the  counter  the  amount  in  excess  of  the  overdraft,  it  not  ap 
peariug  that  the  receiving  teller  was  present,  and  it  appearing  that 
in  his  absence  the  other  officers  acted  in  his  place,  it  was  held 
payment  to  the  bank.  The  court  said:  "When  one  *  *  *  finds 
behind  the  counter  one  of  its  officers  employed  in  its  business,  and 
upon  his  demand  pays  a  debt  due  the  bank  in  good  faith,  without 
any  knowledge  that  the  officer's  authority  is  so  limited  that  he  has 
no  right  to  receive  it,  he  must  be  protected,  and  the  bank  must  be 
bound  by  the  payment."  East  River  Nat.  Bank  v.  Gove,  57  N.  Y. 
597.  See,  also,  Second  IsTat.  Bank  v.  Averell,  2  App.  D.  C.  470,  25 
L.  R.  A.  761.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
121;   Cent.  Dig.  §§  293-S02. 

44  Dougherty  v.  A'anderpool,  35  Miss.  165;  Thatcher  v^  Bank  of 
State  of  New  York,  5^  Sandf.  (N.  Y.)  121.  See  "Banks  and  Bank- 
ing," DeCs  Dig.  (Key  No.)  §  121;   Cent.  Dig.  §§  293-302. 

•«3Demarest  v.  lloldeman,  34  Ind.  App.  6S5,  73  N.- E.  714;  Morse, 
Banks  &  B.  (4th  Ed.)  §  168.  See  ''Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  121;   Cent.  Dig.  §§  203-302. 

4«  Jumper  v.  Commercjial  Bank  of  Columbia,  4S  S.  C.  430,  26  S. 
E.  725.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  121;  Cent. 
Dig.  §§  293-302. 


26  DEPOSITS  (Ch.  2 

a  deposit,  and  may  be  explained  or  contradicted  by  oral  tes- 
timony.*^ Of  course,  a  pass  book  is  not  negotiable.*^  It  is 
usual  for  the  depositor  to  write  the  items  of  his  deposit,  with 

47  Bank  of  Lawrenceville  v.  Rockmore  &  Co.,  129  Ga.  582.  59  S. 
E.  291;  Talcott  v.  First  Nat.  Bank,  53  Kan.  480,  36  Pac.  1066.  24 
L.  R.  A.  737;  Follansbee  v.  Parker,  70  111.  11;  French  v.  Eastern 
Trust  &  Banking  Co.,  91  Me.  485,  40  Atl.  327;  President,  etc.,  of 
Union  Bank  v.  Knapp.  3  Pick.  (Mass.)  96,  15  Am.  Dec.  181;  Davis 
V.  Lenawee  Co.  Sav.  Bank,  53  Mich.  163,  18  N.  W.  629;  Branch  v. 
Dawson,  36  Minn.  193,  30  N.  W.  545 ;  Quattrochi  v.  Farmers'  & 
Merchants"  Bank,  89  Mo.  App.  500;  Mechanics'  &  Farmers'  Bank  v. 
Smith,  19  Johns.  (N.  Y.)  115;  Bruen  v.  Hone,  2  Barb.  (N.  Y.)  586; 
Greenhalffh  Co.  v.  Farmers'  Nat.  Bank,  226  Pa.  184,  75  Atl.  260, 
134  Am.  St.  Rep.  1016. 

It  has  been  held  that,  if  the  deposit  be  entered  when  made,  the 
entry  is  original  and  binding  on  the  bank ;  but  if  the  entry  be  after- 
wards made  by  copying  from  the  books  of  the  bank,  it  could  be 
questioned.  President,  etc.,  of  Manhattan  Co.  v.  Lydig,  4  Johns. 
(N.  Y.)  377,  4  Am.  Dec.  280.  See,  also,  Hepburn  v.  Citizens'  Bank 
of  Louisiana,  2  La.  Ann.  1007,  46  Am.  Dec.  564;  Mechanics'  & 
Traders'  Bank  v.  Banks,  11  La.  261. 

Though  a  deposit  be  not  entered  in  the  books  of  the  bank  till 
five  days  after  its  entry  in  the  pass  book,  the  deposit  must  be  held 
to  have  been  made  at  the  date  of  the  entry  in  the  pass  book.  Was- 
son  V.  Lamb,  120  Ind.  514,  22  N.  E.  729,  6  L.  R.  A.  191,  16  Am. 
St.  Rep.  342. 

A  depositor,  failing  to  examine  his  pass  book,  is  not  thereby 
estopped  to  claim  that  the  amount  entered  was  too  small,  unless 
the  banS  was  prejudiced  by  the  neglect.  Kembie  v.  Nat.  Bank  of 
Rondout,  94  App.  Div.  544,  88  N.  Y.  Supp.  246,  affirmed  183  N.  Y. 
545,  76  N.  E.  1098. 

But  where  a  debtor,  D.,  applied  for  credit  to  a  bank  for  the  amount 
of  the  debt,  promising  to  deposit  in  a  few  days,  and  the  credit  was 
given,  and  D.  took  a  deposit  slip  and  pass  book  in  the  name  of 
A.,  his  creditor,  and  delivered  them  to  him  in  payment  of  the  debt, 
the  transaction  was  a  loan  by  the  bank  to  D.,  and  a  deposit  of 
the  amount  by  A.,  and  D.'s  failure  to  deposit  could  not  affect  A.'s 
rights.  Andrews  v.  State  Bank  of  Wheatland,  9  N.  D.  325,  S3  N. 
W.  235.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  121; 
Cent.  Dig.  §  300. 

48  Witte  V.  Vincehot,  43  Cal.  325 ;  Stewart  v.  State,  42  Tex.  242. 
See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  151;    Cent.  Dig.  §  3S3. 


§§  7-8)       RECEIPT   AND'  ENTRY    OF   GENERAL    DEPOSITS  27 

his  own  name  as  depositor,  upon  a  deposit  slip,  andto  hand 
it  in  with  the  pass  book,  in  which  the  total  ainount  of  the  de- 
posit is  entered  by  the  teller;  *'  the  book  being  returned,  but 
the  deposit  slip  being  retained  by  the  bank,  to  guide  it  in 
making  the  proper  entries  in  its  own  books.  Sometimes,  for 
convenience,  as  where  the  depositor  has  failed  to  bring  his 
pass  book  to  the  bank,  a  duplicate  deposit  sli]).  in  the  nature 
of  a  receipt  for  the  deposit,  is  delivered  to  the  depositor. 
Such  a  deposit  slip  is  the  equivalent  of  an  entry  of  the  deposit 
in  the  book,  and  is  prima  facie  evidence  of  the  deposit.^" 

•4  9  Where  plaintiff,  haviiii:  checks  to  deposit,  handed  them  in 
with  his  pass  book  and  a  deposit  slip,  erroneously  headed  with  the 
name  of  another  customer,  and  the  teller  entered  the  amount  in 
the  pass  book  and  returned  it,  and  later  from  the  deposit  slip 
the  amount  was  entered  in  the  ledger  to  the  credit  of  the  other 
customer,  it  was  held  that,  the  pass  book  not  constituting  the 
account  and  being  open  to  explanation,  and  the  effect  of  handing 
in  the  slip  being  a  direction  to  credit  the  other  customer,  so  that 
the  relation  of  debtor  and  creditor  was  not  created  between  plain- 
tiff and  the  bank  as  to  such  deposit,  and  the  lirst  act  of  negligence, 
leading  to  the  error,  if  neglisence  be  considered,  having  been  that 
of  plaintiff,  he  could  not  recover  of  the  bank  on  account  thereof. 
Schwartz  v.  State  Bank,  135  App.  Div.  42,  119  N.  Y.  Supp.  763. 
Of.  Jackson  Ins.  Co.  v.  Cross,  9  Ileisk.  (Tenn.)  283.  See  ''Bunks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  121;    Cent.  Dig.  §§  293-302. 

soweisinger  v.  Bank  of  Gallatin,  10  Lea  (Tenn.)  330;  First  Nat. 
Bank  of  Union  Mills  v.  Clark,  134  N.  Y.  3B8,  32  X.  E.  38,  17  L. 
R.  A.  580  (holding  that  the  delivery  by  the  depositor  to  a  third 
person  of  a  deposit  slip  in  which  a  bank  acknowledged  receipt  of  a 
deposit  did  not  operate  as  an  assignment  of  the  deposit). 

A  deposit  slip  or  receipt  issued  by  the  cashier  upon  a  specific 
deposit  is  prima  facie  evidence  of  the  liability  of  the  bank.  Amer- 
ican Nat.  Bank  of  Arkansas  City  v,  Presuall,  58  Kan.  69,  48  Pac. 
556.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  121;  Cent. 
Dig.  §§  293-302. 


28  DEPOSITS  (Ch. 


DEPOSIT  OF  PAPER 

9.  DEPOSIT  FOR  COLLECTION— Where  checks,  bills, 
notes,  or  other  negotiable  instruments  are  depos- 
ited with  a  bank  for  collection,  the  ownership  of 
the  paper  is  not  transferred;  but  the  bank  holds 
it  as  agent  or  trustee  of  the  depositor  until  collec- 
tion, and  upon  collection,  unless  it  be  otherwise 
agreed,  by  the  weight  of  authority  becomes  debtor 
to  the  depositor  for  the  amount  collected,  as  upon 
a  general  deposit.  A  deposit  is  one  for  collection, 
if  the  indorsement  of  the  paper  so  indicates,  and 
also,  if  the  parties  so  agree,  although  the  paper  be 
not  thus  restrictively  indorsed,  but  is  indorsed  gen- 
erally, either  by  a  special  or  a  blank  indorsement, 
or,  being  payable  to  bearer  is  transferred  by  de- 
livery. 

10.  SALE  OR  DEPOSIT  FOR  COLLECTION— When 
a  negotiable  instrument  is  indorsed  generally,  or, 
being  payable  to  bearer,  is  delivered  to  and  de- 
posited with  a  bank,  the  transaction  may  be  a  sale 
of  the  paper  or  a  deposit  for  collection,  according 
to  the  agreement  of  the  parties.  If  the  paper  is 
credited  by  the  bank  to  the  depositor  as  cash,  the 
rule  prevails  generally  that,  unless  a  different  un- 
derstanding affirmatively  appears,  the  beneficial 
ownership  of  the  paper,  as  v^^eil  as  the  legal  title, 
is  transferred  to  the  bank,  which  thereupon  be- 
comes a  debtor  to  the  depositor  for  the  amount,  as 
upon  a  general  deposit  of  money,  or,  in  other 
v/ords,  that  the  transaction  is  a  sale  of  the  paper ; 
but  by  some  courts  it  is  held  that,  unless  it  af- 
firmatively appears  that  the  credit  is  irrevocable 
by  the  bank,  the  transaction  is  a  deposit  for  col- 
lection. 


g§  9-11)  DErQSIT    OF    I'AIM'.R  20 

11.  CHECK  ON  DEPOSITORY— Where  a  chex-k- on  the 
depository  bank  is  deposited,  the  transaction  is  in 
effect  a  presentment  of  the  check  for  payment,  and 
if  the  bank  unconditionally  credits  the  amount  to 
the  depositor,  it  thereupon  becomes  a  debtor  for 
the  amount  as  upon  a  general  deposit  of  money. 

In  General 

Where  checks,  bills,  nofes,  or  other  negotiable  instruments 
are  "deposited,"  v^^'y-Ag  the  term  somewhat  loosely,  with  a 
bank,  the  transaction  may  take  one  of  several  different  forms, 
according  to  the  circumstances  of  the  case.  It  may  take  the 
form  of  a  deposit  for  collection,  in  which  case  the  ownership 
of  the  paper  is  not  transferred  to  the  bank,  which  holds  the 
paper  as  agent  or  trustee  for  the  depositor  until  collection,  and 
does  not  become  a  debtor  to  the  depositor  until  it  has  made 
the  collection."  Or  the  transaction  may  take  the  form  of 
a  sale  of  the  paper  by  the  depositor  to  the  bank  in  exchange 
for  credit  given  to  him  by  the  bank,  in  which  case  the  paper 
becomes  the  absolute  property  of  the  bank,  which  thereupon 
owes  the  amount  credited  to  the  depositor  as  upon  a  gen- 
eral deposit  of  money."  Or  the  transaction  may  be  a  deposit 
of  a  check  upon  the  depository  bank,  in  which  case,  if  it 
gives  the  depositor  credit  for  the  amount,  it  thereby  in  effect 
pays  the  check,  and  becomes  a  debtor  for  the  amount  as  upon 
a  general  deposit  of  money. -'"^  The  principles  which  determine 
the  legal  effect  of  these  transactions  are  clear,  but  the  applica- 
tion to  particular  cases  is  often  difficult,  for  the  reason  that 
the  agreement  of  the  parties  may  not  be  expressed,  and  must 
be   inferred   from   their  acts  and   froni   other   circumstances.. 

Deposit  for  Collection 

Where  paper  is  deposited  for  collection,  the  nature  of  the 
transaction  may  be  indicated  by  the  indorsement.  An  indorse- 
ment  "for   collection"   is   restrictive,   and   does   not   vest  the 

51  Post,  p.  30.  "sz  Post,  p.  33.  "  Post,  p.  3S. 


30  DEPOSITS  (Ch.  2 

-legal  title  in  the  indorsee,  but  merely  constitutes  the  indorsee 
the  agent  of  the  indorser  for  the  purpose  of  receiving  pay- 
ment."* A  restricted  indorsement  operates  as  constructive 
notice,  and  subsequent  indorsees  can  acquire  no  greater  rights 
than  those  of  the  indorsee  under  the  restrictive  indorsement.^^ 
It  follows  that,  if  the  paper  is  deposited  indorsed  "for  col- 
lection," the  bank  is  the  mere  agent  of  the  depositor,  and  the 
ownership  of  the  paper  does  not  pass  to  it.^*'  The  depositor 
can  terminate  the  agency  at  any  time  and  withdraw  the  pa- 
per ;^^  and  if  the  bank  becomes  bankrupt  before  collection, 
the  paper  does  not  pass  to  the  assignee  or  receiver. ^^     The 

54  Manufacturers'  Nat.  Bank  v.  Continental  Bank,  148  JIass.  .553, 
20  N.  E.  193,  2  L.  R.  A.  699,  12  Am.  St.  Rep.  .598 ;  National  Butch- 
ers' &  Drovers'  Bank  v.  Hubbell,  117  N.  Y.  384,  22  N.  E.  1031.  7  . 
L.  R.  A.  8.52,  15  Am.  St.  Rep.  515;  Sweeney  v.  Easter,  1  Wall.  IGti, 
17  L.  Ed.  G81;  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50. 
13  Sup.  Ct.  533,  37  L.  Ed.  363.  So  an  indorsement  "for  collection  for 
account  of."  Freeman's  Nat.  Bank  v.  National  Tube-Works  Co.. 
151  Mass.  413,  24  N.  E.  779,  8  L.  R.  A.  42,  21  Am.  St.  Rep.  461.  Or 
"for  account."  White  v.  Miners'  Nat.  Bank,  102  U.  S.  658,  26  L. 
Ed.  250.  In  Old  Nat.  Bank  v.  German-American  Nat.  Bank,  155 
U.  S.  556,  15  Sup.  Ct.  221,  39  L.  Ed.  2.59,  Brewer,  J.,  inaccurately 
says  that  a  collecting  bank  under  such  indorsement  acquired  "the 
mere  legal  title,"  never  becoming  its  equitable  owner,  but  such  a 
restrictive  indorsement  transfers  neither  legal  title^uor  beneficial 
ownership.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  159; 
Cent.  Dig.  §§  547-553;  "Bills  and  Notes,"  Dec.  Dig.  (Keij  No.)  § 
292;  Cent.  Dig.  §§  660,  661. 

5  5  Freeman's  Nat.  Bank  v.  National  Tube-Works  Co.,  151  Mass. 
413,  24  N.  E.  779,  8  L.  R.  A.  42,  21  Am.  St.  Rep.  461;  Merchants' 
Nat.  Bank  v.  Hanson,  33  Minn.  40,  21  N.  W.  &49.  53  Am.  Rep.  5. 
See  Negotiable  Instruments  Law,  §§  36,  37.  See  "Banks  and  Bank- 
'ing,"  Dec.  Dig.  {Key  No.)  §  159;  Cent.  Dig.  §§  5',7-553;  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  292;   Cent.  Dig.  §§  660,  661. 

se  See  cases  cited  in  note  54,  supra. 

5  7  National  Butchers'  &  Drovers'  Bank  v.  Hubbell,  117  N.  Y.  384, 
22  N.  E.  1031,  7  L.  R.  A.  852,  15  Am.  St.  Rep.  515.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  158;    Cent.  Dig.  §  5.^3. 

5  8  National  Butchers'  &  Drovers'  Bank  v.  Hubbell,  117  N.  Y. 
384.  22  N.  E.  1031,  7  L.  R.  A.  8-52,  15  Am.  St.  Rep.  515.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §§  158,  159;    Cent.  Dig.  §  5//}. 


§§  9-11)  DEPOSIT    OF    PAPER  31 

mere  fact  that  upon  making  the  deposit  the  dcpositt^rSs  cred- 
ited with  the  amount  on  his  account  does  not  alter  the  rela- 
tion of  the  i)arties.^"  The  bank  has  the  right  to  charge  the 
credit  back  at  any  time ;""  and  if  the  depositor  actually  draws 
upon  the  credit,  the  bank  may  hold  the  paper  as  collateral  se- 
curity for  the  advance,  but  not  as  owner." ^  The  relation  of  the 
parties  changes,  however,  when  the  paper  is  collected.  One 
w'ho  collects  commercial  paper  through  the  agency  of  a  bank 
must  be  held  impliedly  to  contract  that  the  business  may  be 
done  according  to  the  well-known  usages  of  banks,  so  far  as 
to  permit  the  money  collected  to  be  mingled  with  the  funds 
of  the  bank."^  When  payment  is  made,  therefore,  the  de- 
positor has  no  right  to  the  specific  moneys  collected,  but,  by 
the  great  weight  of  authority,  the  bank  simply  becomes  his 
debtor  for  the  amount  as  upon  the  general  deposit  of  so  much 
money;  and  if  the  bank  afterwards  becomes  insolvent,  the 
depositor  must  come  in  with  the  other  general  creditors.®^ 

The  same  principles  govern  the  relation  between  the  bank 
and  the  depositor  where  it  is  their  understanding  that  the  de- 
posit is  for  collection,  notwithstanding  that  the  paper  is  not 
restrictively  indorsed,  but  is  indorsed  generally,  either  by  a 

5  9  National  Butchers'  &  Drovers'  Bank  v.  Hubbell,  117  N.  Y.  384, 
22  N.  E.  1031,  7  L.  R.  A.  852,  15  Am.  St.  Rep.  515.  See  "Banks 
and  Banking:''  Dec.  Dig.  (Kej/  No.)  §§  156-159;  Cent.  Dig.  §§  539- 
552. 

60  In  re  State  Bank,  5G  Minn.  119,  123.  57  N.  W.  336.  45  Am. 
St.  Rep.  454;  Balbach  v.  Frelinghuysen  (C.  C.)  15  Fed.  G75.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  A^o.)  §  159;  Cent.  Dig.  §§ 
5.'/7-555. 

61  Michigan  State  Bank  v.  Gardner,  15  Gray  (Mass.)  362;  Ullman 
V.  Barnard,  7  Gray  (Mass.)  554.  See  Morse,  Banks  &  B.  §  576. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  1.59;  Cent.  Dig. 
§§  547-553. 

6  2  Freeman's  Nat.  Bank  v.  National  Tube-Works  Co.,  151  Mass. 
413,  24  N."  E.  779.  8  L.  R.  A.  42.  21  Am.  St.  Rep.  461.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  165;    Cent.  Dig.  §§  573-575. 

63  See  cases  cited  note  54,  supra;    post,  p.  349. 


32  DEPOSITS  (Ch.  2 

special  indorsement  to  the  bank  or  by  a  blank  indorsement,®* 
or,  if  payable  to  bearer,  is  transferred  by  delivery.  In  such 
case,  by  the  law  merchant  the  legal  title  to  the  paper  passes 
to  the  bank,  which  consequently  can  further  negotiate  the 
paper,  and  can  transfer  a  good  title  free  from  equities  to  a 
bona  fide  purchaser.*'^  But  the  bank  holds  the  legal  title,  not 
for  its  own  benefit,  but  for  the  benefit  of  the  depositor.*^® 
It  is  often  said  that  the  bank  does  not  get  "title" ;  but  the 
term  "title"  is  thus  loosely  used  to  indicate  beneficial  owner- 
ship.    Although  the  bank  may  give  credit  to  the  depositor, 

6  4  Balbach  v.  Frelinghuysen  (C.  C.)  15  Fed.  G7o ;  Armstrong  v. 
National  Bank  of  Boyertown,  90  Ky.  431,  14  S.  W.  411,  9  L.  R. 
A.  5.53 ;  In  re  State  Bank,  56  Minn.  119,  57  N.  W.  336,  45  Am.  St. 
Rep.  454.  An  indorsement  "for  deposit"  is  not  restrictive.  "Where 
a  customer  lias  a  deposit  account  with  a  bank,  on  which  he  is 
accustomed  to  deposit  checks  payable  to  himself,  which  are  cred- 
ited to  him  on  his  account,  and  against  which  he  is  authorized  to 
draw,  an  indorsement  'for  deposit'  is,  in  the  absence  of  a  different 
understanding,  a  request'  and  direction  to  deposit  the  sum  to  the 
credit  of  the  customer,  and  passes  the  absolute  title  to  the  check  to 
the  bank."  Security  Bank  of  Minnesota  v.  Northwestern  Fuel  Co., 
58  Minn.  141,  59  N.  W.  987.  See,  also.  National  Commercial  Bank 
V.  Miller,  77  Ala.  168,  54  Am.  Rep.  50;  Fourth  Nat.  Bank  of  Cin- 
cinnati V.  :Mayer,  89  Ga.  108,  14  S.  E.  891.  Cf.  Freeman  v.  Exchaiige 
Bank  of  Macon,  87  Ga.  45,  13  S.  E.  160;  Ditch  v.  Western  Nat. 
Bank,  79  Md.  192.  29  Atl.  72,  23  L.  R.  A.  164,  47  Am.  St.  Rep. 
375.  In  Beal  v.  City  of  Somerville,  50  Fed.  647,  1  C.  C.  A.  598.  17 
L.  R.  A.  291,  an  indorsement  "for  deposit"  is  held  prima  facie  to 
create  a  bailment.  See  note  82,  post.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  ^o.)  §  159;    Cent.  Dig.  §§  547-553. 

6  5  Vickrey  v.  State  Savings  Ass'n  (C.  C.)  21  Fed.  773;  Doppelt 
V.  National  Bank  of  the  Republic,  175  111.  432,  51  N.  E.  753;  Ditch 
V.  Western  Nat.  Bank,  79  Md'.  192,  29  Atl.  72.  23  L.  R.  A.  164,  47 
Am.  St.  Rep.  375;  Cody  v.  City  Nat.  Bank,  55  Mich.  379,  21  N.  W. 
373;  Hoffman  v.  First  Nat.  Bank  of  Jersey  City,  46  N.  J.  Law, 
604.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  159;  Cent. 
Dig.  §§  547-553. 

CO  Seybold  v.  Grand  Forks  Nat.  Bank,  5  N.  D.  460,  67  N.  \Y- 
682.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  159;  Cent. 
Dig.  §§  5.',7-553. 


§§  9-11)  DEPOSIT    OF    PAPER  33 

the  credit  is  provisional,  and  the  bank  may  cancei^^t."^  At 
any  time  before  the  paper  is  paid,  and  while  it  is  in  the  pos- 
session of  the  I:»ank,  the  depositor  can  demand  its  return;"'* 
and  if  the  bank  has  become  insolvent,  he  can  demand  the 
paper  from  the  assignee  or  receiver,*''*  and  if  the  latter  col- 
lects it,  he  is  liable  therefor  to  the  depositor.^" 

Sale  or  Deposit  for  Collection 

A  difficult  question  may  be  presented  where  the  paper  is 
indorsed  without  restriction,  and  is  credited  in  the  depositor's 
"pass  book  as  so  much  cash.  Such  a  transaction  on  its  face  is 
consistent  with,  and  indeed  indicates,  a  sale  of  the  paper, 
which,  like  money  so  deposited,  becomes  the  absolute  property 
of  the  bank."^  If  the  parties  intend  a  sale,  it  will,  of  course, 
be  given  that  effect.''^    On  the  other  hand,  if  the  parties  intend 

0  7  Midland  Nat.  Bank  of  Kansas  City  v.  Brigbtwell,  148  Mo.  3o8, 
49  S.  W.  994,  71  Am.  St.  Rep.  608.  See  "Banks  and  Bankinf),"  Dec. 
Dig.  {Key  No.)  §  159;   Cent.  Dig.  §§  5-^7-5.53. 

OS  Bank  of  America  v.  Waydell,  187  X.  Y.  llo,  79  N.  E.  857.  See 
''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  159;  Cent.  Dig.  §§ 
Slfli-SoS. 

G 9  In  re  State  Bank,  56  Minn.  119,  57  X.  W.  336,  45  Am.  St.  Rep. 
454.  Se-e  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §  159;  Cent. 
Dig.  §§  5.'/7-553. 

7  0  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50.  13  Sup.  Ct. 
533,  37  L.  Ed.  3G3 ;  Manufacturers"  Nat.  Bank  v.  Continental  Bank, 
148  Mass.  553,  20  N.  E.  193,  2  L.  R.  A.  699,  12  Am.  St.  Rep.  598; 
Armstrong  v.  National  Bank  of  Boyertown,  90  Ky.  431,  14  S.  W. 
411,  9  L.  R.  A.  553 ;  Armour  Packing  Co.  v.  Davis,  118  N.  C.  548,  24 
S.  E.  305;  post,  p.  209.  See  "Banks  and  Banking,''  Dec.  Dig.  (Key 
A'o.)  §  166;    Cent.  Dig.  §§  57^-586. 

7iTaft  V.  QuiBsigamond  Nat.  Bank,  172  Mass.  363,  52  N.  E.  387. 
See  "Banks  and  Banl<ing,"  Dec.  Dig.  {Key  Xo.)  §  159;  Cent.  Dig.  §§' 
547-5.53. 

7  2  Armour  Packing  Co.  v.  Davis,  118  N.  C.  548,  24  S.  E.  365.  In 
the  absence  of  a  usage,  custom,  or  agreement  of  any  kind,  a  deiwsit 
of  an  indorsed  check  in  a  bank,  for  which  it  gives  credit  to  the 
depositor  as  cash  in  a  drawing  account,  is  consistent  with  a  finding 
of  an  absolute  sale  of  the  paper  to  the  bank,  especially  where  the 
checks  of  the  depositor  w^re  honored  l)y  the  bank  at  times  several 
TIFF.BKS.&  B.— 3 


34  DEPOSITS  (Ch.  2 

a  deposit  for  collection,  it  will  be  given  that  effect.  The  bank 
may  define  its  position  as  agent,  and  not  as  purchaser,  by 
crediting  the  paper  as  such,  and  not  as  cash,^^  or  by  gen- 
eral notices,  printed  on  its  pass  books  or  deposit  slips,  or  other- 
wise brought  home  to  the  depositor,  that  it  accepts  deposits 
of  paper  only  as  agent  for  collection,'*  or  by  an  agreement 
with  the  depositor  as  from  a  course  of  dealing  as  to  his  de- 
posits,"^ ^  or  by  a  special  agreement  as  to  the  particular  de- 
weeks  subsequent  to  the  date  wben  the  bank  knew  the  check  was 
lost  in  being  forwarcle.d  to  the  drawee  for  colleetiou,  when  the  de- 
positor's account  would  not  have  been  enough  to  meet  the  checks 
if  the  amount  of  the  missing  check  had  been  charged  back,  and  where 
his  pass  book  was  afterwards  written  up  without  charging  back 
the  amount  of  the  check.  Taft  v.  Quinsigamond  Nat.  Bank;  172 
Mass.  363,  52  N.  E.  387.  See  ''Bank.s  and  Banking,"  Dec.  Dig. 
(Key  A"o.)  §  -/59;    Cent.  Dig.  §§  5^7-553. 

7  3  Thompson  v.  Giles,  2  Barn.  &  C.  422 ;  Bailie  v.  Augusta  Sav- 
ings Bank,  95  Ga.  277,  21  S.  E.  717,  51  Am.  St.  Rep.  74.  See  "Bank.s 
and  Banking,"  Dec.  Dig.  (Key  No.)  §§  158,  159;  Cent.  Dig.  §§  5^2- 
553. 

7  4  In  re  State  Bank,  56  Minn.  119,  57  N.  W.  336,  45  Am.  St.  Rep. 
454 ;  South  Park  Foundrj"  &  Machine  Co.  v.  Chicago  Great  Western 
Ry.  Co.,  75  Minn.  ISO,  77  N.  W.  796.  See  ''Banks  and  Banking," 
Dec.  Dig.  (Key  Xo.)  §§  15S,  159;   Cent.  Dig.  §§  5J,2-553. 

7  5  Armour  Packing  Co.  v.  Davis.  US  N.  C.  548,  24  S.  E.  365 
(agreement  by  course  of  dealing  that,  though  depositor  could  draw 
against  credit,  the  paper  should  be  charged  back  if  not  paid).  To 
the  same  effect:  Murchison  Nat.  Bank  v.  Dunn  Oil  Mills  Co.,  150 
N.  C.  718,  64  S.  E.  885;  Fanset  v.  Garden  City  State  Bank,  24  N. 
D.  248,  123  N.  W.  686. 

Yet  where  checks  were  received  vjnder  an  agreement  that  they 
should  be  credited,  and,  if  not  paid,  charged  back,  it  was  held  that 
title  passed  to  the  bank  subject  to  the  condition  that  it  might 
rescind  the  credit  if  the  checks  were  not  paid,  and  that  its  failure 
before  collection  did  not  devest  its  title.  Brusegaard  v.  UeLand,  72 
Minn.  283,  75  N.  W.  228. 

Complainant  sent  a  sight  draft  to  a  bank  in  New  York,  drawn  on 
a  debtor  in  Boston  and  payable  to  the  bank's  order.  In  the  ac- 
couipanying  deposit  ticket,  it  was  named  under  the  head  of  "Checks," 
but  it  was  credited  on  the  bank's  books  as  if  it  were  a  deposit  of 


§§  9-11)  DEPOSIT    OF    PAPEK  35 

posit. ■^^  Or  tlie  matter  may  be  regulated  by  general  usages 
obtaining  in  the  locality,  or  by  statute." 

Usually  the  cases  in  which  a  bank  is  held  to  have  been  only 
an  agent  for  collection  have,  as  a  controlling  element,  evi- 
dence of  usage  or  notice  or  particular  agreement.  Where 
these  elements  are  wanting,  the  courts  are  not  agreed  as  to 
the  effect  to  be  given  to  a  deposit  of  negotiable  paper  indorsed 
without  restriction  and  credited  as  money. 

By  most  courts  it  is  held  upon  such  a  state  of  facts  that 
the  paper  immediately  becomes  the  property  of  the  bank,  and  it 
thereupon  becomes  debtor  of  the  depositor  for  the  amount.'** 

money.  It  wa.s  forwarded  for  collection,  but  before  it  was  col- 
lected the  bank  closed  its  doors.  There  was  no  express  agreement 
with  the  bank  that  out-of-town  paper  should  be  deposited  as  cash", 
nor  was  complainant  indebted  to  the  bank.  During  five  years  com- 
plainant had  never  drawn  against  out-of-town  paper  before  it  was 
actually  collected;  and,  although  complainant  was  allowed  intei-est 
on  its  daily  balance,  it  appeared  that  the  bank  reserved  the  right 
to  charge  exchange  and  interest  for  the  average  time  taken  in 
collection  on  such  paper.  Held,  that  the  bank  did  not  become  owner 
of  the  draft.  Fuller,  C.  J.,  appears  to  draw  a  distinction  between 
a  Iiill  of  exchange  and  a  check.  St.  Louis  &  S.  F.  Ry.  Co.  v.  Johns- 
ton, i:J3  U.  S.  506.  10  8up.  Ct.  .300,  33  L.  Ed.  0.S3. 

In  Burton  v.  United  States.  100  U.  S.  283,  25  Sup.  Ct.  243,  40  L.  Ed. 
482,  it  was  said  that  the  custom  of  the  bank  to  charge  a  chock  up 
against  the  depositor's  account,  when  the  check  was  not  paid,  did 
not  vary  the  legal  effect  of  the  transaction,  and  was  simply  a 
method^ pursued  by  the  bank  of  exacting  payment  from  the  indorser. 
/S'ce  "Banks  and  Bankinff,"  Dec.  Dig.  (Key^No.)  §§  158,  159;  Cent. 
Big.  §§  5-'i2-55S. 

70  Rapp  v.  National  Security  I'.ank,  K!0  Pa.  420.  20  Atl.  508.  See 
"Banks  and  Banking"  Dec.  Dig.  [Keg  Xo.)  §§  /.T8.  J.'>9;  Cent.  Dig. 
§§  .5i?-JJJ. 

77  See  Taft  v.  Quinsigamond  Nat.  Bank,  172  Mass.  303.  52  N.  E. 
387.  See  "Banks  and  Banking,"  Dec.  Dig.  (Keg  Xo.)  §§  1-58,  159; 
Cent.  Dig.  §§  5.'i2-5.5.3. 

7  s.  Burton  v.  United  States,  100  U.  S.  283,  25 -Sup.  Ct.  243.  40  L. 
Ed.  482;  American  Trust  &  Savings  Bank"  v.  Gueder  &  Paeschke 
Mfg.  Co.,  150  111.  330,  37  N.  E.  227;  I.anterman  v.  Travous,  73  111. 
App.  070,  affirmed  174  111.  4.50,  51   X.  E.  805;    Wnsson  v.  Lamb,  120 


36  DEPOSITS  (Ch.  2 

The  rule  has  been  stated  as  follows :  "Upon  a  deposit  being 
made  by  a  customer  in  a  bank,  in  the  ordinary  course  of  busi- 
ness, of  money,  checks,  drafts,  or  other  negotiable  paper  re- 
ceived and  credited  as  money,  the  title  to  the  money,  drafts, 
or  other  paper  immediately  becomes  the  property  of  the  bank, 
which  becomes  debtor  to  the  depositor  for  the  amount,  unless 
a  different  understanding  affirmatively  appears."  ^®  If  it  may 
be  assumed  that  the  credit  is  absolute,  and  may  not  be  revoked 
by  the  bank,  this  result  clearly  follows. ^° 

Other  courts  hold  that  the  practice  which  has  grown  up 
among  banks  to  credit  deposits  of  checks  and  drafts  at  once 
to  the  account  of  the  depositor  and  to  allow  him  to  draw 
against  them  is  a  mere  gratuitous  privilege,  which  is  also 
often  extended  \vhere  the  paper  is  indorsed  "for  collection," 
as  well  as  where  it  is  indorsed  without  restriction,  and  which 
the  bank  may  revoke  at  any  time,  and  consequently  that,  un- 
less it  affirmatively  appears  that  the  credit  is  irrevocable,  the 
beneficial  ownership  of  the  paper  is  not  transferred,  and  the 
transaction  constitutes  a  deposit  for  collection.®^    Thus  where 


Ind.  514.  22  N.  E.  729,  6  L.  R.  A.  191,  16  Am.  St.  Rep.  342 ;  Noble 
V.  Doiighten,  72  Kan.  336,  83  Pac.  1048,  3  L.  R.  A.  (N.  S.)  1167; 
Cody  V.  City  Nat.  Bank,  55  Mich.  379,  21  N.  W.  373 ;  Security  Bank 
of  Miiniesota  v.  Northwestern  Fuel  Co.,  .58  Minn.  143,  59  N.  W. 
987;  Heudley  v.  Glohe  Refinery  Co.,  106  Mo.  App.  20,  79  S.  W. 
1163;  Metropolitan  Nat.  Bank  of  New  York  v.  Loyd,  90  N.  Y.  5.30; 
'Cragie  v.  Hadley,  99  N.  Y.  131,  IN.  E.  537,  52  Am.  Rep.  9;  Walton 
V.  Riverside  Bajik,  29  Misc.  Rep.  304,  60  N.  Y.  Supp.  519;  Wil- 
liams V.  Cox,  97  Tenn.  .555,  37  S.  W.  282 ;  Aebi  v.  Bank  of  Evansville, 
124  Wis.  73,  102  N.  W.  329,  68  L.  R.  A.  964,  109  Am.  St.  Rep.  925. 
See  "Banks  and  Banl^ing,"  Dec.  Dirj.  {Key  ]^o.)  §§  158,  159;  Cent. 
Dig.  §§  5J,2-553. 

7»  Security  Bank  of  Minnesota  v.  Northwestern  Fuel  Co.,  58  Minn. 
143.  59  N.  W.  987.  See  "Banks  and  Banking,"  Dec.  Dig.  {Keg  Xo.) 
§§  158,  150;   Cent.  Dig.  §§  5Jt2-5.53. 

8  0  See  note  75,  supra. 

81  Balbach  v.  Frelinghuysen  (C.  C.)  15  Fed.  675;  Beal  v.  City  of 
Somerville,  50  Fed.  647,  1  C.  C  A.  598,  17  L.  R.  A.  291;  City  of 
Philadelphia  v.  Eckels  (C.  C.)  98  Fed.  485.     See,  also,  St.  Louis  & 


§§  9-11)  DEPOSIT   OF    PAPER  37 

a  city  treasurer  deposited  checks  in  a  bank,  indorsed  by  him 
"for  deposit,"  and  they  were  immediately  credited  to  him  in 
his  pass  book,  but  it  did  not  appear  that  there  was  any  agree- 
ment to  that  effect,  or  that  there  had  been  any  agreement  dur- 
ing the  time  he  had  been  a  depositor  that  his  checks  should  be 
treated  as  cash,  or  that  he  should  draw  against  them  before 
they  were  collected,  and  the  bank  became  insolvent  before  the 
checks  were  collected,  and  their  proceeds  passed  into  the  hands 
of  a  receiver,  it  was  held  that  no  title  passed  to  the  bank,  ex 
cept  as  bailee,  and  that  the  city  was  entitled  to  the  proceeds. 
"The  first  impression,  coming  from  the  view  that  the  deposit 
was  immediately  entered  to  the  credit  of  the  city  on  its  pass 
book,"  said  the  court,  "favors  the  view  of  the  appellant  [the 
receiver]  ;  but  a  careful  consideration  will  demonstrate  that 
this  was  a  mere  matter  of  convenience,  and  the  entry  would 
have  been  the  same  on  either  theory.  *  *  *  On  the  other 
hand,  the  appellant  fails  to  show  that  the  city  had  an  abso- 
lute right  to  check  against  the  deposit  as  soon  as  made,  irrev- 
ocable by  notice  from  the  bank ;  and  that  such  right  did  not 
exist  must  be  received  by  this  court  as  a  matter  of  judicial 
knowledge,  notwithstanding  the  parties  in  Moors  v.  Goddard, 
147  Alass.  287,  17  N.  E.  532,  and  the  complainant  in  this 
case,  seem  to  have  regarded  it  necessary  to  prove  the  practice 

S.  F.  Ry.  Co.  V.  Johnston.  133  U.  S.  5GG,  10  Sup.  Ct.  390,  33  L.  Ed. 
GS3.  But  see  Burton  v.  United  States,  19G  U.  S.  283,  25  Sup.  Ct.  243, 
49  L.  Ed.  482.  Where  one  deposits  in  a  bank  a  check  or  draft  on 
a  third  party,  it  is  a  bailment,  unless  the  understanding  be  that 
he  may  at  once  draw  against  the  deposit,  or,  being  indebted  to 
the  bank,  that  the  deposit  may  be  applied  on  such  indebtedness. 
Perth  Amboy  Gaslight  Co.  v.  Middlesex  County  Bank,  60  N.  J. 
Eq.  84,  45  Atl.  704. 

"Every  man,  who  pays  bills  not  then  due  into  the  hands  of  his 
banker,  places  them  there  as  in  the  hands  of  his  agent,  to  obtain 
payment  of  them  when  due.  If  the  banker  discounts  the  bill,  or  ad- 
vances money  upon  the  credit  of  it,  that  alters  the  case.  He  then  ac- 
quires the  entire  property  in  it,  or  has  a  lien  on  it  pro  tanto  for 
his  advance."  Giles  v.  Perkins,  9  East,  11,  14,  See  ''Banks  and 
Bankinf/,"  Dec.  Dig.  {Key  No.)  §§  15S,  159;    Cent.   Dip.  §§  51,2-553. 


38  DEPOSITS  (Ch.  2 

of  a  particular  bank  with  reference  to  this  matter."  ®-  The 
rule  as  declared  in  these  cases,  that  the  paper  does  not  become 
the  property  of  the  bank,  is  not  inconsistent  with  the  right 
which  the  bank  undoubtedly  has,  if  the  conditional  credit  is 
drawn  against  by  the  depositor,  to  hold  the  paper  until  the 
amount  drawn  is  made  good  from  other  sources.**^ 

Checks  on  Depository  Bank 

Where  the  paper  deposited  is  a  check  on  the  depository 
bank,  other  principles  are  involved.  The  transaction  is  in 
effect  a  presentment  of  the  check  for  payment.  If  the  bank 
honors  the  check,  it  charges  the  amount  to  the  account  of 
the  drawer,  and  credits  the  amount  to  the  account  of  the  de 
positor,  and  the  transaction  is  then  closed.  The  bank  owe? 
to  the  depositor  the  amount  credited,  as  upon  a  general  deposit 
of  so  much  cash.^*  The  legal  effect  is  the  same  as  if  the 
money  were  first  paid  and  then  deposited.  The  bank  may, 
however,  credit  the  depositor's  account  conditionally,  that  is, 


8  2  Beal  V.  City  of  Somerville,  50  Fed.  647,  1  C.  C  A.  598.  17  L. 
R.  A.  291.  The  court  lays  much  weight  ou  the  fact  that  trfe  indorse- 
ment was  "for  deposit."  which  was  held,  erroneously,  it  Is  submitted 
(ante,  note  64),  to  import  a  bailment,  with  the  result  that  it  rested 
on  the  bank  to  support  affirmatively  a  claim  that  on  the  deposit 
it  became  an  owner  of  the  check.  See  "Banks  and  Banking"  Bee. 
Dig.  (Key  No.)  §§  158,  159,  166;    Cent.  Dig.  §§  542-553,  51^-516. 

83  Stapylton  v.  Cie  des  Phosphates  de  France,  88  Fed.  53,  31  C. 
C.  A.  383 ;  Balbach  v.  Frelinghuyseu  (C.  C.)  15  Fed.  675,  682.  'See 
''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  158,  159;  Cent.  Dig. 
§§  5J,2-553. 

84  City  Nat.  Bank  of  Selma  v.  Burn.s,  68  Ala  267,  44  Am.  Itep. 
138;  American  Exchange  Nat.  Bank  v.  Gregg.  138  111.  596.  28  N. 
E.  839.  32  Am.  St.  Rep.  171;  Titus  v.  Mechanics'  Nat.  Bank  at 
Trenton,  35  N.  J.  Law,  588;  Oddie  v.  National  City  Bank  of  New 
York,  45  N.  T.  735,  6  Am.  Rep.  160;  Consolidated  Nat.  Bank  of 
New  York  v.  First  Nat.  Bank  of  Middletown.  129  App.  Div.  538,  114 
N.  Y.  Supp.  308;  First  Nat.  Bank  v.  Burkhardt,  100  U.  S.  686, 
25  L.  Ed.  766.  See,  also.  Second  Nat.  Bank  of  New  Albany  v.  Gib- 
boney.  43  Ind.  App.  492.  87  N.  E.  1064.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  12. 'i :   Cent.  Dig.  §  307. 


§§  9-11)  DEPOSIT    OF    TAPKH  30 

upon  condition  that  if  upon  examination  the  check  or  the 
drawer's  account  be  not  found  good  the  check  shall  be  charged 
back  to  the  depositor;  and  in  that  case  the  transaction  is  not 
closed  until  after  the  expiration  of  the  time  within  which  the 
bank  has  reserved  the  right  to  charge  l)ack  the  amount  credited 
without  exercise  of  such  right. **^  This  right  is  often  reserved 
by  notice  printed  in  the  pass  book  that  checks  upon  the  depos- 
itory will  be  credited  conditionally,  and  if  not  found  good  at 
close  of  business  w^ill  be  charged  back  to  the  depositors,  and 
the  latter  notified  of  the  fact.  If  there  is  no  agreement  that 
the  credit  is  conditional,  however,  there  being  no  fraud,  and 
the  check  being  genuine,  it  is  generally  held  the  transaction 
is  closed  as  fully  as  if  the  bank  had  paid  over  the  counter 
■  the  amount  called  for  by  the  check,  and  that  the  Ijank  cannot 
charge  back  the  amount  because  the  account  of  the  drawer 
turns  out  to  be  overdraw^n.*^  "A  bank  has  always  the  means 
of  knowing  the  state  of  the  account  of  the  drawer :  and  if  it 
elects  to  pay  the  paper  it  voluntarily  takes  upon  itself  the  risk 
of  securing  itself  out  of  the  drawer's  account  or  otherwise."  *' 

Depository  Bank  as  Holder  in  Due  Course 

It  might,  perhaps,  seem  that  a  bank  which  has  discounted 
or  purchased  a  negotiable  instrument,  and   has  given   credit 


8''  Lunisdon  v.  Gilnian.  SI  Ilun,  ."20.  30  N.  T.  Supp.  1124.  Sec 
-Banks  and  Bankinf/;'  Dcr.  Dig.  {Key  No.)  §  /.?'/;    Vent.  Diff.  §  307. 

86  See  cases  cited  in  note  84,  supra.  Contra:  National  Odld 
Banlc  &  Trust  Co.  v.  McDonald.  51  Cal.  64.  21  Am.  Rep.  r.!»7  (hold- 
ing that,  if  the  drawer  has  no  funds,  the  credit  in  the  pass  book 
may  be  canceled) ;  Ocean  Park  Bank  v.  Rogers.  G  Cal.  App.  (mN. 
!t2  Pac.  879.  AVhere  the  depositor  knew  that  the  drawer  had  no 
funds,  he  was  guilty  of  fraud,  and  the  bank  could  charge  it  hack. 
Peterson  v.  Union  Nat.  Bank,  52  Pa.  20G,  ni  Am.  Dec.  140.  Ct. 
Bryan  v.' First  Nat.  Bank  of  McKees  Rocks,  205  Pa.  7,  54  Atl.  480. 
See  "Banks  and  Bankhif/"  Dee.  Dig.  (Keg  .To.)  §  12.'/;  Cent.  Dig.  § 
307. 

8  7  Oddie  V.  National  City  Bank  of  New  York,  45  N.  Y.  735,  G 
Am.  Rep.  IGO:  pos^.  p.  149.  i^ee  "Banks  and  Banking,"  Dec.  Dig. 
(/vf  1/  A'o.)  §  12^;    Cent.  Dig.  §  307. 


40  DEPOSITS  (Ch.  2 

for  the  amount  to  a  depositor,  thereby  in  effect  promising  to 
pay  out  the  money  on  his  checks,  is,  so  far  as  concerns  the  giv- 
ing of  value,  a  purchaser  for  vahie,  or  holder  in  due  course. 
Such,  indeed,  appears  to  be  the  English  rule.^®  In  this  coun- 
try, however,  it  is  held  that  the  mere  giving  of  credit  to  the 
depositor's  account  does  not  make  the  bank  a  holder  for  val- 
ue,^ ^  but  that  to  have  that  effect  the  credit  must  be  drawn 
upon,  in  which  case  the  bank  is  a  holder  for  value  to  that 
extent  ;^°  or  else  the  credit  must  be  absorbed  by  the  deposi- 
tor's antecedent  indebtedness,  as  where  his  account  is  over- 
drawn when  the  credit  is  made,  in  which  case  the  bank  is 


88  See  Royal  Bank  v.  Tottenham,  [1894]  2  Q.  B.  715,  717,  718; 
Capital  &  Counties  Bank  v.  Gordon,  [1903]  A.  C.  240,  245.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  2Vo.)  §  126;  Cent.  Dig.  §§  305, 
309;  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  356;  Cent.  Dig.  § 
90S. 

8  9  Alabama  Grocery  Co.  v.  First  Nat.  Bank  of  Eusley,  158  Ala. 
143,  48  South.  340,  132  Am.  St.  Rep.  18 ;  Union  Nat.  Bank  of  Colum- 
bus V.  Winsor,  101  Minn.  470,  112  N.  W.  999,-  118  Am.  St.  Rep.  641; 
Citizens'  State  Bank  v.  Cowles,  180  N.  Y.  346,  73  N.  E.  33,  105 
Am.  St.  Rep.  765 ;  Elgin  City  Banking  Co.  v.  Hall,  119  Tenn.  548, 
108  S.  W.  1068;  Manufacturers'  Nat.  Bank  v.  Newell,  71  Wis.  309, 
37  N.  W.  420;  Thompson  v.  Sioux  Falls  Nat.  Bank,  150  U.  S.  231, 
14  Sup.  Ct.  94,  37  L.  Ed.  1063;  Queen  City  Savings  Bank  &  Trust 
Co.  v.  Reyburu  (C.  C.)  163  Fed.  597.  It  is  otherwise  where  the  bank 
assumes  an  obligation  to  another  on  the  faith  of  the  credit.  Mont- 
rose Sav.  Bank  v.  Claussen,  137  Iowa,  73,  114  N.  W.  547.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  126;  Cent.  Dig.  §§ 
305,  309;  "Bills  and  Notes,"  Dec.  Dig.  [Key  No.)  §  356;  Cent.  Dig. 
§  908. 

90  City  Deposit  Bank  of  Columbus  v.  Green,  130  Iowa,  384,  106 
N.  W.  942;  Dreilling  v.  First  Nat.  Bank,  43  Kan.  197,  23  Pac.  94, 
19  Am.  St.  Rep.  126;  Shawmut  Nat.  Bank  v.  Manson,  168  Mass. 
425,  47  N.  E.  196;  Security  Bank  of  Mmnesota  v.  Petruschke,  101 
Minn.  478,  112  N.  W.  1000,  118  Am.  St.  Rep.  644 ;  Benson  v.  Keller, 
37  Or.  120,  60  Pac.  918;  Northfield  Nat.  Bank  v.  Arndt,  132  Wis. 
383,  112  N.  W.  451,  12  L.  R.  A.  (N.  S.)  82.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  126;  Cent.  Dig.  §§  305,  309;  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  356;   Cent.  Dig.  §  90S. 


§§  12-16)      TITLE    TO    AND    DISPOSITION    OF   DEPOSITS  41 

a  holder  for  value  to  that  extent."^  This  rule  has  bfftDmc  fixed 
in  most  states  by  the  Negotiable  Instruments  Law,  which  pro- 
vides :°-  "Where  the  transferee  receives  notice  of  any  infirm- 
ity in  the  instrument  or  defect  in  the  title  of  the  person  nego- 
tiating the  same  before  he  has  paid  the  full  amount  agreed 
to  be  paid  therefor,  he  will  be  deemed  to  be  a  holder  in  due 
course  only  to  the  extent  of  the  amount  theretofore  paid  by 
him." 

TITLE  TO   AND   DISPOSITION   OF  GENERAL 
DEPOSITS 

12.  IN  GENERAL — Where  a  general  deposit  is  made  by  a 

person  in  his  own  name,  a  contract  is  entered  into 
by  the  bank  with  the  depositor  to  pay  the  amount 
of  the  deposit  to  him  or  to  his  order,  and  he  has 
a  right  to  demand  such  payment.  The  depositor 
may,  however,  hold  such  right  as  trustee  or  agent 
for  a  third  person,  who  consequently  will  have  an 
equitable  right  to  enforce  such  payment.  In  the 
absence  of  an  adverse  claim,  the  bank  must  make 
payment  upon  demand  of  the  depositor. 

13.  DEPOSIT  BY  TRUSTEE— Where  a  deposit  is  made 

by  a  trustee,  the  relation  of  debtor  and  creditor  is 
created  between  the  bank  and  the  trustee,  and  the 
bank  must  make  payment  to  the  trustee,  unless  it 
has  notice  that  by  such  paym.ent  it  would  actually 
participate  in  a  breach  of  trust. 

»i  McNigbt  V.  Parsons,  136  Iowa,  390,  113  N.  W.  858,  22  L.  R.  A. 
(N.  S.)  718,  125  Am.  St.  Rep.  265;  Wallabout  Bank  v.  Peyton,  123 
App.  Div.  727,  108  N.  Y.  Supp.  42.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  126;  Cent.  Dig.  §§  S05,  309;  "Bills  and  Notes," 
Dec.  Dig.  {Key  No.)  §§  35^-356;    Cent.  Dig.  §§  90. ',-908. 

0  2  Section  54.  See  Hodge  v.  Smith,  130  Wis.  320,  110  N.  W.  193 ; 
Albany  County  Banlc  v.  People's  Co-operative  Ice  Co.,  92  App.  Div. 
47,  80  N.  Y.  Supp.  773.  Sec  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.) 
§§  35.',-356;    Cent.  Dig.  §§  90.',-90S. 


42  DEPOSITS  »  (Ch.  2 

EXCEPTION— If  the  bank  knows  that  a  deposit  of 
trust  moneys  is  a  breach  of  trust,  it  will  hold  the 
moneys  as  a  constructive  trustee. 

14.  DEPOSIT  BY  AGENT— Where  a  deposit  is  made  by 

an  agent  in  the  name  of  his  principal,  the  principal 
alone  has  a  right  to  demand  payment  from  the 
bank.  If  the  deposit  is  made  by  the  agent  in  his 
own  name,  although  the  bank  has  notice  of  the 
agency,  the  agent  may  demand  payment,  in  the  ab- 
sence of  an  adverse  claim  by  the  principal. 

15.  DEPOSIT  IN  NAME  OF  THIRD  PERSON— Where 

a  deposit  is  made  in  the  name  of  a  third  person, 
the  bank  must  make  payment  to  such  person,  in 
the  absence  of  an  adverse  claim  by  the  actual  de- 
positor or  another.  The  actual  depositor  has  a 
right  to  demand  payment  from  the  bank,  if  the 
money  deposited  was  his  own  and  he  did  not  intend 
to  transfer  the  beneficial  ownership  of  the  deposit 
to  the  person  in  whose  name  it  was  made. 

16.  ASSIGNMENT,   ATTACHMENT,    ETC.— The   right 

to  a  deposit  may  be  assigned  by  the  depositor,  and 
is  subject  to  attachment  or  garnishment  at  the  suit 
of  his  creditor,  subject  to  the  rights  of  those  who 
may  be  equitably  entitled  to  the  deposit. 

In  General 

The  primary  duty  which  a  bank  owes  to  its  depositor  is  to 
pay  to  him  the  amount  standing  to  his  credit  upon  a  proper 
demand.®^  The  right  of  the  depositor  to  receive  payment 
may,  however,  be  held  by  him  as  trustee  or  agent  for  a  third 
person,  who  consequently  may  have  an  equitable  right  to  de- 
mand payment  from  the  bank ;  and  this  may  be  so,  although 
there  be  nothing  on  the  face  of  the  transaction  to  indicate 
that  a  third  person  has   an  interest  in   the  deposit.     Again, 

93  Post,  p.  56. 


§§  12-16)      TITLE    TO    AND    DISPOSITION    OF    DEPOSITS  43 

a  person  may  make  a  deposit  in  the  name  of  a  third  person, 
and  yet  himself  have  a  rii^lit  to  receive  payment  from  the 
bank.  \'arious  considerations,  therefore,  may  have  to  be  taken 
into  account  in  answering  the  question  as  to  who  is  entitled 
to  demand  payment  of  a  deposit,  or,  as  it  is  often  put,  who  has 
the  "title  to  a  deposit."  It  is,  of  course,  not  strictly  accurate 
to  use  the  term  "title  to  a  deposit"  in  this  sense,  since  the  title 
to  and  ownership  of  moneys  deposited  is  in  the  bank,  which  is 
merely  a  debtor  for  the  amount,  and  the  question  under  con- 
sideration is:  What  person  has  the  right  to  enforce  the  obli- 
gation? If  it  be  borne  in  mind,  however,  that  by  "title  to  a 
deposit"  nothing  more  is  meant  than  the  right  to  demand  pay- 
ment, the  term  is  not  misleading. 

Deposit  by  Apparent  Ozviicr 

Where  a  bank  receives  a  deposit  and  credits  the  depositor 
with  the  amount,  it  thereby  impliedly  enters  into  a  contract 
with  him  to  pay  the  money  to  him  or  to  his  order.  Unless 
the  bank  has  notice  of  an  adverse  claim  to  the  fund,  it  be- 
comes its  duty,  therefore,  to  make  payment  upon  receiving 
such  an  order,"*  and  it  is,  of  course,  fully  protected  in  mak- 
ing such  payment."^  If.  the  bank  pays  out  money  without  a 
proper  order,  the  rights  of  the  depositor  are  not  thereby  af- 
fected.»« 


94  Merchants'  &  Planters'  Bank  v.  Meyer.  50  Ark.  490,  20  S.  W. 
406;  First  Nat.  Bank  of  Ix)ck  Haven  v.  Mason,  95  Pa:  113,  40  Am. 
Rep.  632;  Citizens'  Nat.  Bank  v.  Alexander.  120  Pa.  476,  14  Atl. 
402:  In  re  Plankinton  Bank,  87  Wis.  378,  58  N.  W.  784.  See  "Banks 
and  Banlinfir  Dee.  Difi.  (Key  yo.)  §  129;   Cent.  Dig.  §§  312-326.   . 

o-' Greene  v.  Bank  of  Camas  Prairie,  7  Idaho.  570.  64  Pac.  S8S ; 
McEwen  v.  Davis,  39  Ind.  109;  :Martin  v.  Kansas  Nat.  Bank.  66 
Kan.  (555,  72  Pac.  218;  Fnlton  liank  v.  New  York  &  S.  Canal  Co.. 
4  Paige  (N.  Y.)  127;  Woodliridge  v.  Finst  Nat.  Bank.  45  App.  TMv. 
166.  61  N.  Y.  Siipp.  258:  Davis  v.  Panhandle  Nat.  Bank  (Tex.  Civ. 
App.)  29  S.  W.  926.  See  "Banks  and  Bunkinu,"  Dee.  DUj.  {Key  Xo.) 
§  129;   Cent.  Diy.  §§  312-326. 

8c  Post.  p.  160. 


44  DEPOSITS  (Ch.  2 

Deposit  by  Trustee 

Where  a  deposit  is  made  by  an  executor,  administrator,  pub- 
lic officer,  or  other  trustee,  the  relation  of  debtor  and  creditor 
is  created  between  the  bank  and  the  depositor  as  in  other  cas- 
es.*'^ The  rule  is  subject  to  the  exception  that  if  the  deposit 
is  made  in  violation  of  the  trust,  and  this  is  known  to  the  bank, 
so  that  it  has  no  right  to  receive  the  deposit,  as  in  the  case 
of  a  deposit  made  by  a  public  officer  in  violation  of  law,  the 
relation  of  debtor  and  creditor  is  not  created,  but  the  bank 
holds  the  money  as  a  constructive  trustee,  with  the  result  that 
if  the  bank  becomes  insolvent  the  beneficiary  has  a  preferred 
claim  as  against  the  general  creditors,  if  he  can  trace  and 
identify  the  fund.^^ 

97  Hawkins  v.  Cleveland,  C,  C.  &  St.  L.  Ry.  Co.,  S9  Fed.  26G, 
32  C.  C.  A.  198 ;  McNulta  v.  West  Chicago  Park  Com'rs,  99  Fed. 
900,  40  C.  C.  A.  155 ;  Glj-nn  County  v.  Brunswick  Terminal  Co.,  101 
Ga.  244,  28  S.  E.  604 ;  Otis  v.  Gross,  96  111.  612,  3G  Am.  Rep.  157 ; 
Fletcher  v.  Sharpe,  108  Ind.  276,  9  N.  E.  142 ;  Officer  v.  Officer,  120 
Iowa,  389,  94  N.  W,  947,  98  Am.  St.  Rep.  365;  State  v.  Corning 
State  Savings  Bank,  128  Iowa,  597,  105  N.  W.  159  (receiver) ;  Han- 
son V.  Roush,  139  Iowa,  58,  116  N.  W.  1061;  McAfee  v.  Bland 
(Ky^,)  11  S.  W.  439;  Paul  v.  Draper,  158  Mo.  197,  59  S.  W.  77,  81 
Am.  St.  Rep.  296;   Henry' v.  Martin,  88  Wis.  367,  60  N.  W.  263. 

So  where  an  officer  wrongfully  deposits  public  funds  in  his  own 
name,  where  the  character  of  the  funds  is  unknown  to  the  bank. 
Long  V.  Emsley,  57  Iowa,  11,  10  N.  W.  280.  See,  also,  Rhlnehart  v. 
New  Madrid  Banking  Co.,  99  Mo.  App.  381,  73  S.  W.«815. 

The  addition  of  the  word  "clerk"  -to  the  name  of  a  general  de- 
positor did  not  make  a  deposit  by  the  clerk  of  a  county  court  a  spe- 
cial one^  McLain  v.  Wallace,  103  Ind.  562,  5  N.  E.  911.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  130;   Cent.  Dig.  §§  319-321. 

98  state  V.  Thum,  6  Idaho,  323,  55  Pac.  858;  Independent  Dist.  of 
Boyer  v.  King,  80  Iowa,  497,  45  N.  W.  908 ;  Page  County  v.  Rose,  130 
Iowa,  296,  106  N.  W.  744,  5  L.  R.  A.  (N.  S.)  886;  Brown  v.  Sheldon 
State  Bank,  139  Iowa,  83,  117  N.  W.  289 ;  Myers  v.  Board  of  Educa- 
tion, 51  Kan.  87,  32  Pac.  658,  37  Am.  St.  Rep.  263 ;  Board  of  Fire  & 
Water  Com'rs  of  City  of  Marquette  v.  Wilkinson,  119  :Mich.  655,  78 
N.  W.  893,  44  li.  R.  A.  403 ;  State  v.  Midland  State  Bank,  52  Neb.  1, 
71  N.  W.  1011,  66  Am.  St.  Rep.  484 ;  Watts  v.  Board  of  Com'rs  (Okl.) 
95  Pac.  771;  State  v.  Fosteir,  5  Wyo.  199,  38  Pac.  926,  29  L.  R.  A. 


i§  12-16)      TITLE   TO   AND   DISPOSITION    OF    DEPOSITS  45 

Unless  the  case  falls  within  the  exception,  if  a -^H^^sit  is 
made  by  one  a&  trustee,  a  contract  is  entered  into  between  the 
bank  and  the  trustee,  and  the  trustee  has  the  right  to  witli- 
draw  the  deposit,  and  the  bank  may  assume  that  the  trustee 
will  appropriate  the  money,  when  drawn,  to  its  proper  use.''" 
The  bank  is  under  no  obligation  to  look  after  the  appropria- 
tion of  trust  funds  when  withdrawn  or  to  protect  the  trust  by 
setting  up  a  jus  tertii  against  a  demand  by  the  trustee.  "A 
bank  account,  *  *  *  even  when  it  is  a  trust  fund,  and 
designated  as  such,  differs  from  other  trust  tunds,  which  are 
permanently  invested  for  the  sake  of  being  held  as  such ;  for 
a  bank  account  is  made  to  be  checked  against,  and  represents 
a  series  of  current  transactions.  The  contract  between  the 
bank  and  the  depositor  is  that  the  former  will  pay  according 
to  the  checks  of  the  latter,  and,  when  drawn  in  proper  form, 
the  bank  is  bound  to  presume  that  the  trustee  is  in  the  course 
of  performing  his  duty,  and  to  honor  them  accordingly."  "" 
If,  however,  the  bank  has  notice  or  knowledge  that  a  breach 
of  trust  is  being  committed  by  an  improper  withdrawal  of 
funds,  and  participates  in  the  misapplication  of  the  fund,  it 
is  liable.^"^     If,  for  example,  a  bank  knowingly  receives  in 

22G,  03  Am.  St.  Rep.  47 ;  San  Diego  County  v.  California  Nat.  Bank 
(C.  C.)  52  Fed.  59;  Merchants'  Nat.  Bank  v.  School  Dist.  No.  S,  94 
Fed.  705,  36  C.  C.  A.  432;  post,  p.  354.  See  "Banks  and  Bankinf/:' 
Dec.  Dig.  (Key  No.)  §  130;  Cent.  Dig.  §§  319-327. 

99  Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14;  Munnerlyn  v.  Augusta 
Savings  Bank,  88  Ga.  333,  14  S.  E.  554,  30  Am.  St.  Rep.  159 ;  State 
Nat.  Bank  v.  Reilly,  124  111.  464,  14  N.  E.  657 ;  Duckett  v.  National 
Mechanics'  Bank,  86  Md.  400,  38  Atl.  983,  .39  L.  R.  A.  84,  63  Am.  St. 
Rep.  513;  Loring  v.  Brodie,  134  Mass.  453;  Board  of  Chosen  Free- 
holders of  County  of  Essex  v.  Newark  Cify  Nat.  Bank,  48  N.  J.  Eij. 
51,  21  Atl.  185.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
130;  Cent.  Dig.  §§  319-327. 

100  Central  Nat.  Bank  v.  Connecticut  Mut.  Life  Ins.  Co.,  104  U.  S. 
54,  20  L.  Ed.  693.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
130;  Cent.  Dig.  §§  319-327. 

101  >[cNulta  V.  West  Chicago  Bark  Com'rs,  99  Fed.  900,  40  C.  C.  A 
153 :  Swift  V.  Williams,  08  Md.  230,  11  Atl.  835 :  Duckett  v.  National 


46  ,  DEPOSITS  (Ch.  2 

satisfaction  of  a  debt  from  a  depositor  funds  standing  to  his 
credit  as  trustee,  it  participates  in  a  breach  of  trust,  and  must 
refund  to  the  beneficiary. ^°-  So,  where  a  check  was  drawn. 
"Pay  to  the  order  of  S.,  casliier,  $2,000,  to  deposit  to  the  crec - 
it  of  C,  trustee,"  and  the  bank  credited  it  to  the  personal  ac- 
count of  C,  who  drew  out  the  money  and  embezzled  it,  it 
was  held  that  the  bank  was  liable  to  the  beneficiary  for  the 
proceeds  of  the  check  so  deposited,  since  by  crediting  the  mon- 
ey to  the  personal  account  of  C.  with  knowledge  that  it  ought 
to  be  denosited  to  the  account  of  C.  as  trustee,  the  bank  par- 
ticipated in  a  breach  of  trust. ^''^  This  case  probably  extends 
the  responsibility  of  Uie  bank  to  its  farthest  limit.  Other 
cases,  which  are  nearly,  if  not  quite,  undistinguishable,  hold 
that  where  a  check  is  payable  to  one  as  trustee,  and  is  deposit- 
ed by  him  in  his  personal  account,  and  embezzled,  the  bank 
is  not  by  the  form  ot  the  check,  which  it  might  safely  cash, 
put  upon  inquiry,  so  as  to  be  liable  for  the  embezzled  mon- 
ev.^°*     In  the  absence  of  a  claim  by  the  beneficiary,  payment 

Mechauics'  Bauk,  86  Md.  400,  38  Atl.  9.83,  39  L.  R.  A.  84,  03  Am.  St. 
Rep.  513;  Bank  of  Greensboro  v.  Clapp,  76  N.  C.  482.  See  cases 
cited  iu  note  99,  supra.  See,  also,  Parks  v.  Knickerbocker  Trust  Co., 
137  App.  Div.  719,  122  N.  Y.  Supp.  521 ;  Emerado  Farmers'  Elevator 
Co.  V.  Farmers'  Bank  of  Emerado,  20  N.  D.  270,  127  N.  W.  523,  29  L. 
R.  A.  (N.  S.)  567.  -See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
J30;  Cent.  Dig.  §§  319-321. 

102  Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14 ;  American  Trust  iV; 
.  Banking  Co.  v.  Boone,' 102  Ga.  202.  29  S.  E.  182,  40  L.  R.  A.  250,  OC 
Am.  St.  Rep.  167;  Armour-Cudaby  Backing  Co.  v.  First  Nat.  Bank  of 
Greenville.  69  Miss.  700,  11  Soutli.  28;  Lund  v.  Seamen's  Bank  for 
Savings,  37  Barb.  (N.  T.)  129.  Cf.  Moore  v.  Hanscom,  101  Tex.  293, 
106  S.  W.  876.  But  see  Lee  t.  Marion  Nat.  Bank,  94  Ky.  41,  21  S. 
W.  346.'  The  payment  can  be  avoided  only  by  the  cestui.  Sayx'e  v. 
Weil,  94  Ala.- 466,  10  South.  546,  15  L.  It.  A.  544.  See  "Banks  and 
Banking,''  Dec.  Dig.  (Key  No.)  §  130;  Cent.  Dig.  §§  310-327. 

i03Duckett  v.  National  Mechanics'  Bank,  86  Md.  400,  38  Atl.  983, 
39  L.  R.  A.  84,  m  Am.  St.  Rep.  513.  -Sec  "Bank.'<  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  130;  Cent.  Dig.  §§  319-321. 

104  Batchelder  v.  Central  Nat.  Bank,  188  Mass.  25,  73  N.  E.  1024 ; 
Mills  V.  Nassiui  Bank,  52  JUisc.  Rep.  243,  102  N.  Y.  Supp.  1119;  Safe- 


§§  12-16)      TITLE    TO    AND    DISrOSITION    OF    DEPOSITS  47 

by  the  bank  to  the  executor  or  achninistrator  of  tlj^.  trustee 
is  vaHd.^°° 

Deposit  by  Agent 

It  is,  of  course,  elementary  law  that  a  bank  may  not  honor 
checks  purporting  to  be  drawn  by  an  agent  of  the  depositor 
unless  the  agent  has  proper  authority.^""  And  if  one  person 
as  agent  of  another  op«ns  an  account  in  the  name  of  another, 
this  warrants  no  implication  of  authority  in  the  agent  to  check 
upon  the  account,  although  the  pass  book  shows  that  the  de- 
posit is  made  by  the  agent. ^°^  But  where  an  account  is  opened 
by  an  agent  in  his  own  name,  although  his  agency  is  dis- 
closed,  different  considerations   may   prevail. ^"^     The  agree- 

Deposit  &  Trust  Co.  v.  Diainoiul  Nat.  Bank,  194  Pa.  334.  44  Atl.  lOtU  • 
Hood  V.  Keiisiiifiton  Xat.  P.ank,  2S0  Pa.  508,  79  Atl.  714. 

Indeed,  in  Duckett  v.  National  Mechanics'  Bank,  SO  Md.  400,  oS 
Atl. 1 983.  39  L.  R.  A.  84,  G3  Am.  St.  Hep.  .jl3.  where  the  bank  credited 
to  the  personal  account  of  C,  who  was  trusfee  of  an  estate,  the  pro- 
ceeds of  another  check  deposited  therein,  issued  in  payment  of  a 
debt  due  such  estate,  in  these  words:  "Pay  to  the  order  of  S.. 
cashier,  $2,000  for  deposit  to  the  credit  of  C,  being  the  balance  of 
purchase  money  due  him  as  trustee  for  J." — and  C.  drew  the  mon- 
ey from  the  bank  and  embezzled  it.  it  was  held  that  the  bank  was 
not  liable  to  the  estate,  on  the  theory  that  it  knowinj^ly  participated 
in  the  breach  of  trust",  since  it  credited  the  proceeds  as  directed  in 
the  check.  See  "Banks  and  Banling,"  Dec.  Dig.  (Kvij  .Vo.)  §  130: 
Cent.  Din.  §§  319-327. 

losEyerman  v.  Second  Nat.  Bank.  13  Mo.  App.  289;  Id.,  84  Mo. 
408;  Scudder  v.  Trenton  Savings-Fund  Soc,  58  N.  J.  Eq.  154,  43  Atl. 
3 ;  Boone  v.  Citizens'  Savings  Bank  of  New  York  City,  84  N.  Y.  S3, 
38  Am.  Rep.  498.  -See  "Banks  and  Bankinn,"  Dec.  Dig.  {Keu  No.)  § 
130;  Cent.  Dig.  §§  319-327. 

106  Post,  p.  160.  See  Deri  v.  Union  Bank  of  Brooklyn,  65  Misc. 
Rep.  531,  120  N.  Y.  Supp.  813.  Sec  "Banks  and  Banking:''  Dee.  Dig. 
(Key  No.)  §  130;  Cent.  Dig.  §§  SlU-327. 

107  Second  Nat.  Bank  of  New  Albany  v.  Gibboney,  43  Ind.  App. 
492.  87  N.  E.  1064 ;  Heath  v.  New  Bedford  Safe  Deiwsit  &  Trust  Co., 
1S4  Mass.  481,  69  N.  E.  215;  Bates  v.  First  Nat.  Bank  of  Brockport. 
S9  N.  Y.  286 ;  Brown  v.  Daugherty  (C.  C.)  120  Fed.  526.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  130;  Cent.  Dig.  §§  319-327. 

108  Houig  V.  Pacific  Bank,  73  Cal.  464,  15  Pac.  58;  Kerr  v.  People's 


48  DErosiTS  (Ch.  2 

ment  of  the  bank  is  to  repay  to  the  person  who  makes  the  de- 
posit, or  upon  checks  drawn  by  him,  and  the  bank  may  not 
set  up  an  adverse  title  to  defeat  the  claims  of  its  own  de- 
positor.^"® Although  the  depositor  declares  to  the  bank  that 
he  is  the  agent  of  another,  the  bank  may  assume  that  in  check- 
ing out  the  deposit  he  is  dealing  within  his  authority.^^"  So 
if  a  depositor  opens  an  account  "as  agent,"  without  disclosing 
his  principal,  it  seems  that,  in  the  absence  of  an  adverse  claim, 
the  bank  must  honor  his  checks.^^^    It  is,  indeed,  the  tendency 


Bank,  15S  Pa.  305,  27  Atl.  963.  See,  also.  Walker  v.  State  Trust  Co., 
40  App.  Div.  55,  57  N.  T.  Supp.  525.  See  "Banks  and  Banking"  Dec. 
Dig.  {Key  No.)  §  130;  Cent.  Dig.  §§  319-327. 

109  See  First  Nat.  Bank  of  Lock  Haven  v.  Mason,  95  Pa.  117,  40 
Am.  Kep.  G32 ;  Pennsylvania  Title  &  Trust  Co.  v.  Meyer,  201  Pa. 
299,  50  Atl.  998.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key  Jvo.)  § 
130;   Cent.  Dig.   §§   319-327. 

110  First  Nat.  Bank  of  Sharon  v.  Valley  State  Bank,  60  Kan.  G21, 
57  Pae.  510 ;  Interstate  Nat.  Bank  v.  Claxton,  97  Tex.  569,  80  S.  W. 
604,  65  L.  R.  A.  820,  104  Am.  St.  Rep.  885  (cf.  Commercial  &  Agricul- 
tural Bank  v.  Jones,  18  Tex.  811) ;  Randolph  v.  Allen,  73  Fed.  23,  19 
C.  C.  A.  353  (cf.  Harris  &  Co.  v.  Chipman,  156  Fed.  929,  84  C.  C.  A. 
429").  But  see  Farmers'  Loan  &  Trust  Co.  v.  Fidelity  Trust  Co., 
86  Fed.  541,  30  C.  C.  A.  247. 

Where  the  treasurer  of  a  corporation  wrongfully  drew  checks  in 
proper  form  on  its  account,  payable  to  himself  personally,  and  de- 
posited them  to  his  own  account  in  another  bank,  which  collected 
them,  and  permitted  him  to  withdraw  the  deposit,  such  bank  was  not 
liable  therefor  to  the  corporation,  since  the  drawee  bank,  by  paying 
the  checks,  acknowledged  that  the  treasurer  had  authority  from  the 
corporation  to  draw  them,  and  hence  the  fact  that  they  were  payable 
to  the  treasurer  individually  did  not  require  the  depositary  bank  to 
make  further  inquiry.  Havana  Cent.  R.  Co.  v.  Knickerbocker  Trust 
Co.,  198  N.  Y.  422,  92  N.  E.  12.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  130;  Cent.  Dig.  §§  319-321. 

111  Munnerlyn  v.  Augusta  Savings  Bank,  88  Ga.  333,  14  S.  E.  554, 
30  Am.  St.  Rep.  159 ;  Cunningham  v.  Bank  of  Nampa,  13  Idaho,  167, 
88  Pac.  975,  10  L.  R.  A.  (N.  S.)  706,  121  Am.  St.  Rep.  257;  Eyeruiau  v. 
Second  Nat.  Bank,  13  Mo.  App.  289;  Id.  84  Mo.  408;  Patterson  v. 
Marine  Nat.  Bank,  130  Pa.  419,  18  Atl.  632,  17  Am.  St.  Rep.  778; 
Silsbee  State  Bank  v.  French  Market  Grocery  Co.  (Tex.)  132  S.  W. 


§§  12-16)      TITLK   TO   AND    DISPOSITION    OF   DEPOSITS  49 

of  the  courts  to  assimilate  the  case  of  a  deposit  b}*-;m  agent 
in  his  own  name  to  a  deposit  by  a  trustee,  and  to  hold  that, 
in  the  absence  of  notice  to  the  contrary,  the  bank  must  assume 
that  in  checking  upon  the  account  the  agent  is  acting  within 
his  authority.^^-  Accordingly,  it  was  held  in  a  recent  case  in 
Pennsylvania  that,  where  F.  opened  an  account  in  the  name  of 
"F.,  Attorney  for  B.,"  F.  was  the  depositor,  so  that  the  bank 
might  pay  checks  so  signed  by  him,  having  no  notice  of  F.'s 
intended  misappropriation.^ ^^  These  cases  are  to  be  distin- 
guished from  those  that  hold  that  the  bank  may  not  appro- 
priate the  money  of  the  principal  or  other  person  equitably 
entitled  to  the  fund  to  the  individual  debt  of  the  depositor."* 

Rights  of  Equitable  Ozvner  of  Deposit 

Although  the  relation  between  the  bank  and  its  depositor 
is  merely  that  of  debtor  and  creditor,  and  the  balance  due  on 
the  account  is  a  debt  to  the  depositor,  the  question  is  always 
open:  To  whom  in  equity  does  it  beneficially  belong?  If 
the  money  deposited  was  that  of  a  third  person,  and  was  held 
by  the  depositor  in  a  fiduciary  capacity,  the  equitable  owner 
may  assert  his  right  to  the  deposit."^  The  contract  created 
by  the  deposit  being  between  the  bank  and  the  depositor,  the 

4Go ;  Walker  v.  Maubattau  Bank  (C.  C.)  25  Fed.  247  (special  deposit). 

An  agent,  depositing  as  "M.,  Agent,"  cannot  maintain  an  action 
for  the  deposit  in  liis  own  name  after  the  agency  ceases.  Miller  V 
State  Bank  of  Duluth,  57  Minn.  319,  59  N.  W.  309.  See  "Banks  and 
Banking,"  Dee.  Dig.  {Keii  Xo.)  §  130;  Cent.  Dig.  §§  319-327. 

11^  See  cases  in  preceding  note.  See  ''Banks  and  Banking,"  Dee. 
Dig.  {Key  No.)  §  130;  Cent.  Dig.  §§  319-327. 

118  Pennsylvania  Title  &  Trust  Co.  v.  Meyer,  201  Pa.  299,  50  Atl.  998. 

If  the  principal  deposits  to  the  credit  of  the  agent,  the  bank  must 
honor  his  checks,  unless  it  has  positive  knowledge  that  they  were 
drawn  in  violation  of  the  trust.  Merchants'  &  Planters'  Nat.  Bank 
of  Union  v.  Clifton  Mfg.  Co.,  56  S.  C.  320,  33  S.  E.  750.  See  "Banks 
and  Banking;'  Dee.  Dig.  {Key  No.)  §  130;  Cent.  Dig.  H  SI 9-327. 

114  Post,  p.  67. 

115  Central  Nat.  Bank  v.  Connecticut  Mut.  Life  Ins.  Co.,  104  U.  S. 
54,  20  L.  Ed.  693 ;  Union  Stock-Yards  Nat.  Bank  v.  Gillespie,'  137  U. 
S.  411,  11  Sup.  Ct.  118,  34  L.  Ed.  724 ;  Kohards  v.  Hamrick.  39  Ind. 

Tiif.Bks.&B.— 4 


50  DEPOSITS  (Ch.  2 

remedy  of  the  person  equitably  entitled  is  in  equity.^ ^®  Thus 
a  principal  may  maintain  a  bill  in  equity  against  a  bank  to  re- 
cover moneys  deposited  by  his  factor  as  the  proceeds  of  goods 
consigned   for   sale.^^^ 

A  bank  may  not  set  up  an  adverse  claim  to  defeat  the  claim 
of  its  depositor;  ^^*  but,  after  receiving  notice  of  an  adverse 
claim,  the  bank  will  pay  its  depositor  at  its  peril. ^^®  In  such 
case  the  bank  may  bring  a  bill  of  interpleader.^ ^o  Payment  to 
the  equitable  owner  will,  of  course,  always  be  a  defense.^ ^^ 


App.  134,  79  N.  E.  386 ;  Wichita  Nat.  Bank  v.  Maltby,  53  Kan.  567, 
36  Pac.  1000;  Hemphill  v.  Yerkes.  132  Pa.  545,  19'Atl.  342,  19  Am. 
St.  Rep.  607.  See  ''Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  130; 
Cent.  Dig.  §§  319-327. 

116  Union  Stock- Yards  Nat.  Bank  v.  Gillespie.  137  U.  S.  411.  11  Sup. 
Ct.  118.  34  L.  Ed.  724;  Hawke.ve  Gold  Dredging  Co.  v.  State  Bank 
of  Iowa  Falls  (C.  C.)  157  Fed.  253;  State  Bank  of  Iowa  Falls  v. 
Hawkeye  Gold  Dredging  Co.,  177  Fed.  164,  lOO  C.  C.  A.  626;  Board 
of  Chosen  Freeholders  of  County  of  Essexv.  Newark  City  Nat.  Bank. 
48  N.  J.  Eq.  51,  21  Atl.  185.  Cf.  Smith  v.  Board  of  Chosen  Freehold- 
ers of  Essex  County,  48  N.  J.  Eq.  627,  23  Atl.  268.  See  Nolting  v. 
National  Bank  of  Virginia,  99  Va.  54,  37  S.  E.  804.  See  ''Banks  and 
Banking"  Dec.  Dig.  (If eg  No.)  §  130;  Cent.  Dig.  §§  319-327. 

117  Union  Stock-Yards  Nat.  Bank  v.  Gillespie,  137  U.  S.  411,  11 
Sup.  Ct.  118,  34  L.  Ed.  724.  See  "Banks  and  Banking,"  Dec  Dig. 
(Key  No.)  §  130;  Cent.  Dig.  §§  319-327. 

118  First  Nat.  Bank  of  Lock  Haven  v.  Mason,  95  Pa.  113,  40  Am. 
Rep.  632 ;  Citizens'  Nat.  Bank  v.  Alexander,  120  Pa.  476,  14  Atl.  402 ; 
Townseud  v.  Webster  Five-Cent  Savings  Bank,  143  Mass.  147,  9  N.  E. 
521 ;  Lund  v.  Seamen's  Bank  for  Savings,  37  Barb.  (N.  Y.)  129 ;  Mar- 
tin V.  Miunekahta  State  Bunk,  7  S.  D.  263,  64  N.  W.  127.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  129;  Cent.  Dig.  §§  312-318., 

119  Drumm-Flato  Commission  Co.  v.  Gerlack,  92  Mo.  App.  326; 
Peter  Adams  &  Co.  v.  National  Shoe  &  Leather  Co.,  44  Hun,  629, 
9  N.  Y.  Supp.  75.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
129;  Cent.  Dig.  §§  312-318. 

120  Wayne  County  Sav.  Bank  v.  Airey,  95  Mich.  520,  55  N.  W.  355; 
Harris  Banking  Co.  v.  Miller,  190  Mo.  640,  89  S.  W.  629,  1  L.  R.  A. 

121  Brown  V.  Kinsley  Exch.  Bank,  51  Kan.  359,  32  Pac.  1113.  See 
."Banks  and  Banking,"  Dec.  Dig.  (Keg  No.)  §§  129,  130;  Cent.  Dig.  §§ 

312-327. 


§§  12-16)      TITLE    TO   AND    DISPOSITION    OF    DEPOSITS  51 


Deposit  in  Name  of  Another  Than  Depositor 

Where  orTe  person  makes  a  deposit  in  the  name  of  another, 
whose  agent  he  is,  the  deposit  is,  of  course,  that  of  the  prin- 
cipal.^" So  the  person  in  whose  name  the  deposit  is  made 
is  entitled  to  it,  if  the  depositor  thereby  intended  a  gift,^^^ 
provided,  at  least,  that  the  donee  accepts  it/-^  It  does  not 
follow,  however,  from  the  mere  deposit  in  the  name  of  a 
third  person,  that  he  is  entitled  to  the  deposit.^-''  The  bank 
may,  indeed,  in  the  absence  of  notice  that  he  js  not  the  owner, 
safely  pay  him.^^*^  But  the  depositor  may  show  that  the 
money  was  his  own  and  that  he  did  not  intend  a  gift.^^'' 
\\niere,  for  examjile,  money  is  deposited  in  the  name  of  an- 

(N.  S.)  700  (certificate  of  deposit) ;  Weber  v.  Baulv  for  Savinj;s,  1  City 
Ct.  R.  (N.  Y.)  70;  German  Exeh.  Bank  v.  Commissioners  of  Excise, 
r»7  How.  Prac.  (N.  Y.)  187 ;  Helene  v.  Corn  Exoh.  Banl^^  OH  App.  Div. 
302.  89  N.  Y.  Supp.  310 ;  Dickescliied  v.  Excliange  Bank,  28  W.  Va. 
340 ;  Foss  v.  First  Nat.  ,Bauk  (C.  C.)  3  Fed.  185.  But  see,  First  Nat. 
Bank  of  Morristown  v.  Bininger,  20  N.  J.  Eq.  345.  Cf.  Loan  &  Sav- 
ings Bank  v.  Farmers'  &  Merchants'  Bank,  74  S.  C.  210,  54  S.  E.  304, 
114  Am.  St.  Rep.  991.  See  ''Banks  and  Bankiiuj,"  Dec.  DUj.  {Key 
No.)  §§  129,  130;  Cent.  Dig.  §§  312-321. 

122  Ante.  p.  47. 

123  People  V.  State  Bank  of  Ft.  Edward,  30  Ilun  (N.  Y.)  007.  See 
"Banks  and  Banking,"  Dee.  Dig.  iKeij  No.)  §§  130,  131;  Cent.  Dig. 
§§  816-318,  333. 

12  4  Savings  Bank  of  Baltimore  v.  McCarthy,  89  Md.  194.  42  Atl. 
929;  Scott  v.  Berkshire  County  Savings  Bank,  140  Mass.  1.57,  2  N.  E. 
925;  Branch  v.  Dawson,  30  Minn.  193.  30  N.  W.  545;  post.  p.  454. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Ktg  No.)  §§  130,  131;  Cent.  Dig. 
§§  316-318,  333. 

125  Reynolds  v.  St.  Paul  Trust  Co..  51  Minn.  2.30,  53  N.;W.  457; 
Kerr  v.  People's  Bank,  1.58  Pa.  305,  27  Atl.  903.  See  Republic  Life 
Ins.  Co.  V.  Hudson  Trust  Co.,  130  App.  Div.  OlS.  115  N.  Y.  Supp.  503 
(deposit  to  credit  of  third  person  on  condition  for  depositor's  benefit). 
Sec  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  130,  131;  Cent.  Dig. 
§§  S16-31S. 

126  Reynolds  v.  St.  Paul  Trust  Co.,  51  Minn.  2:!0.  53  N.  W.  457. 
See  "Banks  and  Bunking,"  Dee.  Dig.  (Keg  No.)  S§  130,  131;  Cent. 
Dig.  §§  316-318,  333. 

127  Davis  v.  Lenawee  County  Savings  Bank,  .53  Mich.  103,  18  N.  W. 


52  DEPOSITS  (Ch.  2 

other  for  the  purpose  of  avoiding  attachment,  the  depositor 
may  recover  the  deposit,  on  proof  that  he  did  not  intend  to 
give  or  transfer  the  deposit  to  such  third  person. ^-^ 

Assignment  of  Deposit 

The  right  to  a  deposit,  hke  any  other  chose  in  action,  may 
be  assigned,^-^  and  the  assignment  need  not  be  in  writing.^^" 
As  to  whether  an  assignment  of  a  chose  in  action  is  valid  as 
against  third  persons,  the  law  differs  in  different  jurisdictions ; 
but  before  notice  the  bank  is,  of  course,  protected  in  paying 
upon  the  order  of  the  depositor.^ ^^  By  the  prevailing  rule 
the  mere  giving  of  a  check  by  a  depositor  does  not  operate  as 
an  assignment,  in  whole  or  in  part,  of  the  debt  created  by  the 
deposit,  although  a  different  rule  prevails  in  some  jurisdic- 
tions ;  but,  even  where  the  prevailing  rule  is  in  force,  it  is 
competent  for  the  parties  to  create  such  an  assignment  by  a 


629 ;  Kelly  v.  Beers,  194  N.  Y.  49,  86  N.  E.  9S0,  12S  Am.  St.  Rep.  543. 
See  "Banks  and  Banldng,"  Dec.  Dig.  {Key  JN^o.)  §§  130,  131;  Cent.  Dig. 
§§  316-318,  333. 

12  8  Broderick  v.  Waltham  Savings  Bank,  109  Mass.  149.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  130,  131;-Cent.  Dig.  §§ 
316-318,  333. 

12  9  Schollmier  v.  Schoendelen,  78  Iowa,  426,  43  N.  W.  282,  16  Am. 
St.  Rep.  455;  First  Nat.  Bank  of  Atchison  v.  Wattles,  8  Kan.  App. 
136,  54  Pac.  1108  (certificate  of  deposit) ;  Foss  v.  Lowell  Five  Cents 
Savings  Bank,  111  Mass.  285;  Jaffe  v.  Bowery  Bank,  31  Misc.  Rep. 
778,  65  N.  Y.  Supp.  210.  See,  also,  Johnson  v.  Shuey,  40  Wash.  22, 
82  Pac.  123.  See  "Banks  and  Banking,"  Dec.  Dig'.  {Key  No.)  §  129; 
Cent.  Dig.  §§  33ft,  335. 

1^30  Hellman  v.  McWilliams,  70  Cal.  449,  11  Pac.  059  (assignment  in 
trust) ;  Oppeuheimer  v.  First  Nat.  Bank,  20  Mont.  192,  50  Pac.  419. 
See  Risley  v.  Phenix  Bank  of  City  of  New  York,  S3  N.  Y.  318,  38 
Am.  Rep.  421. 

The  delivery  by  the  depositor  to  a  third  person  of  a  deposit  slip 
acknowledging  receipt  of  an  amount  named  does  not  operate  as  an 
assignment  of  the  deposit.  First  Nat.  Bank  of  Union  IMills  v.  Clark, 
134  N.  Y.  308,  32  N.  E.  38,  17  L.  R.  A.  580.  -See  "Ba7iks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  129;  Cent.  Dig.  §§  331},  335. 

131  Post.  p.  95. 


§§  12-16)      TITLE   TO    AND    DISPOSITION    OF    DEPOSITS  53 

clear  agreement  that  such  shall  be  the  effect  of  thctfansac- 
tion.^3  2 

Garnishment  or  Attacliinoit  of  Deposit 

The  debt  of  a  bank  to  its  depositor  may  be  reached  by  a 
creditor  of  the  depositor  by  garnishment  or  attachment  in  the 
manner  provided  in  the  particular  jurisdiction. ^•''^  If,  how- 
ever, the  person  in  whose  name  the  deposit  stands  is  not  the 
beneficial  owner,  the  beneficial  owner  of  the  deposit  is  enti- 
tled to  it  as  against  the  creditor  of  the  depositor.^^*  Thus  a 
deposit  in  the  name  of  "A.,  Agent,"  cannot  be  reached  by  a 
creditor  of  A.,  if  the  deposit  be  that  of  his  principal. ^^^  Con- 
versely, a  creditor  of  the  equitable  owner  can  by  proper  pro- 


132  Fourth  Street  Nat.  Bank  v.  Yardley,  165  U:  S.  034,  17  Sup.  Ct. 
43Q,  41  L.  Ed.  855.  See,  also,  Risley  v.  Phenix  Bank  of  City  of  New 
York,  83  N.  Y.  318,  38  Am.  Rep.  421  ;  First  Nat.  Bank  of  Union  Mills 
V.  Clark,  134  N.  Y.  368,  32  N.  E.  38,  17  L.  R.  A.  580;  post,  p.  130. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  129,  130;  Cent. 
Dig.  §§  33.',,  335. 

183  Murpbree  v.  City  of  Mobile,  108  Ala.  663,  18  South.  740;  Mayer 
V.  Chattahoochee  Nat.  Bank,  51  Ga.  325 ;  Exchange  Bank  of  Eldorado 
V.  Guliok,  24  Kan.  359  (debt  evidenced  by  certificate  of  deposit  when 
nonnesotiablo) ;  Farmers'  &  ISIechanics'  Nat.  Bank  v.  Ryan,  64  Pa. 
236.  See  Gibson  v.  National  Park  Banjc  of  New  York,  08  N.  Y.  87. 
See  "Garnishment,"  Dec.  Dig.  (Key  No.)  §  56;  Cent.  Dig.  §§  110,  111; 
"Banks  and  Banking,"  Cent.  Dig.  §§  328-330. 

134  Packer  v.  Crary,  121  Iowa,  388,  96  N.  W.  870;  Morrill  v.  Ray- 
mond, 28  Kan.  415,  42  Am.  Rep.  167;  Farmers'  &  Mechanics'  Nat. 
Bank  v.  King,  57  Pa.  202,  98  Am.  Dec.  215 ;  Marx  v.  Parker,  9  Wash. 
473,  37  Pac.  675,  43  Am.  St.  Rep.  849.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §§  130,  131;  Cent.  Dig.  §§  316-333;  "Garnish- 
ment," Dec.  Dig.  {Key  No.)  §  56;  Cent.  Dig.  §§  110,  111. 

135  Des  Moines  Cotton  Mill  Co.  v.  Cooper,  93  Iowa,  654,  61  N.  W. 
1084;  Ingersoll  v.  First  Nat.  Bank,  10  Minn.  396  (Gil.  315). 

The  bank  may  be  charged  as  garnishee,  no  other  person  claiming 
the  nionoy.  Protor  v.  Greene,  14  R.  I.  42;  Silsbee  State  Bank  v. 
French  Market  Grocery  Co.  (Tex.)  132  S.  W.  465.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §§  130,  131;  Cent.  Dig.  §§  316-333; 
"Garnishment,"  Dec.  Dig.  {Key  No.)  §  56;  Cent.  Dig.  U  110,  111. 


54  DEPOSITS  (Ch.  2 

cess  reach  a  deposit  standing  in  the  name  of  another.^ ^^  The 
attachment  or  garnishment  is  a  Hen  upon  the  amount  actually 
due  to  the  depositor  from  the  time  of  service  upon  the 
bank.^^'^  In  j'urisdictions  where  a  check  is  not  an  assignment, 
no  deduction  from  the  fund  is  to  be  made  by  reason  of  an 
outstanding  check  of  the  depositor/^ ^  unless  the  check  has 
been  certified. ^^®  In  jurisdictions  where  a  check  is  an  assign- 
ment, the  bank  may  pay  a  check  drawn  before  and  presented 
after  service  upon  it.^*°  The  creditor  can  take  no  better  title 
to  the  fund  than  the  depositor  has,  and  the  garnishment  or  at- 
tachment is  subject  to  the  state  of  the  account  between  the 


136  Simmons  v.  Almy,  100  Mass.  239;  Gibson  v.  National  Park 
Bank  of  New  York,  98  N.  Y.  87.  See  "Banks  and  Banlinf/,"  Dec. 
Dig.  {Key  No.)  §§  129,  130;  Cent.  Dig.  §§  328-330. 

137  R.  c.  Neely  Co.  v.  Bank  of  Waynesboro,  7  Ga.  App.  .390.  66'  S. 
E.  1099 ;  Jobnson  v.  Brant,  38  Kan.  754,  17  Pac.  794 ;  Voster  v. 
Swasey,  3  Woodb.  &  M.  364,  9  Fed.'  Cas.  p.  583,  No.  4,985.'  See 
''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  129,  130;  Cent.  Dig.  §§ 
328-330. 

13S  Tost,  p.  127. 

Where  executors,  who  are  invested  witli  discretion  to  distribute 
an  estate  among  tbe  testator's  children  in  such  manner  and  at  such 
times  as  in  their  judgment  will  best  promote  the  children's  interests, 
deposit  money  in  a  bank  to  the  credit  of  the  estate,  and  afterwards- 
give  an  ordinary  check  to  a  child  in  part  distribution,  the  child  does 
not  receive  title,  so  as  to  enable  a  receiver,  appointed  in  proceedings 
supplementary  to  an  execution  against  him,  to  sue  the  bank  before 
the  check  is  presented  for  payment,  since  the  deposit  of^oney  merely 
makes  the  bank  a  creditor  of  the  depositor,  and  the  giving  of  an 
ordinary  check  neither  operates  as  an  assignment  of  the  fund  nor 
gives  the  drawee  any  right  of  action  against  the  bank.  O'Connor  v. 
Mechanics'  Bank,  124  N.  Y.  324,  26  N.  E.  816.  See  "Banks  and  Bank, 
ing,"  Dec.  Dig.  {Key  No.)  §§  129,  130;  C'ent.  Dig.  §§  228-230;  "Garnish- 
ment," Dec.  Dig.  (Key  No.)  §  56;  Cent.  Dig.  §§  110,  111. 

13  9  Post,  p.  131. 

140  National  Bank  of  America  v.  Indiana  Banking  Co.,  114  111. 
483,  2  N.  E.  401.  .S'ec  "Banks  and  Banking,"  Dec  Dig.  {Key  No.)  §§ 
129-130;  Cent.  Dig.  §§  319-333;  "Garnishment,"  Dec.  Dig.  {Key  No.) 
§  56;  Cent.  Dig.  §§  110,  111. 


§§  12-lG)      TITLE    TO    AND    DISrOSITION    OF    DEPOSITS  55 

bank  and  the  depositor.^ ••^  Payment  to  the  creditor  j^rsuanl 
to  a  ju(l,q:ment  binding-  upon  the  depositor  discharges  the  bank 
from  liabiHty  to  the  depositor.^^-  A  bank  is  not  affected  by  a 
garnishment  process,  unless  it  accurately  names  the  depositor, 
and  unless  the  bank  be  shown  to  have  knowledge  of  the  identi- 
ty of  the  depositor  and  the  person  named/" 

Death  of  Depositor 

Upon  the  death  of  a  depositor,  his  rights  in  respect  to  the 
deposit,  of  course,  pass  by  operation  of  law  to  his  executor 
or  administrator.^''*  A  balance  in  bank  may  be  the  subject  of 
a  bequest,  and,  although  the  bank  is  merely  a  debtor  for  the 
amount,  a  bequest  of  the  testator's  money  is  usually  construed 
as  covering  bank  deposits/*^     The  effect  of  the  death  of  a 

141  Moors  V.  Goddard.  147  Mass.  287,  17  N.  K.  532;  liice  v.  Third 
Nat.  Bank,  97  Mich.  414,  5G  N.  W..  77G.  See,  also.  Washinj^ton  Briclv, 
Lime  &  Mfg.  Co.  v.  Traders'  Nat.  Bank,  4B  Wash.  28,  S!>  I'ac.  1.57. 
123  Am.  St.  Kep.  912.  See  ''Banks  and  Bunkimj"  Dec.  Dig.  (Key  No.) 
§§  12S-130;  Cent.  Dig.  §§  319-333;  "Garnishment,"  Dec.  Dig.  {Key 
No.)  §  56;  Cent.  Dig.  §§  110.  111. 

142  Randall  v.  Way,  111  Mass.  50G;  Leonard  v.  New  Bedford  Five 
Cents  Savings  Bank,  116  Mass.  210;  Woods  v.  Milford  F.  C.  Sav. 
Inst.,  58  N.  H.  184.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§§  128-130;  Cent.  Dig.  §§  319-333;  "Garnishment;'  Dec.  Dig.  {Key 
No.)  §  56;  Cent.  Dig.  §§  110,  111. 

143  German  Nat.  Bank  of  Denver  v.  National  State  Bank,  5  Colo. 
App.  427,  39  Pac.  71 ;  Terry  v.  Sisson,  125  Mass.  5G0.  See  "Banks 
and  Banking,"  Dee.  Dig.  (Key  No.)  §§  128-130;  Cent.  Dig.  §§  328-330; 
"Garnisfiment,"  Dec.  Dig.  {Key  No.)  §  56;  Cent.  Dig.  §§  110,  111. 

144  Scliluter  V.  Bowery  Savings  Bank,  117  N.  Y.  125,  22  N.  E.  572, 
5  L.  R.  A.  541,  15  Am.  St.  Rep.  494 ;  Maas  v.  German  Savings  Bank 
in  City  of  New  York.  176  N.  Y.  377,  68  N.  E.  658,  98  Am.  St.  Rep.  6.89. 
See  cases  in  note  105,  supra.  See  "Executors  and  AdminisJrators," 
Dec.  Dig.  {Key  No.)  §§  -'/J,  519;  "Banks  and  Banking,"  Cent.  Dig.  § 
332 

14  s  Mann  v.  Mann,  14  Johns.  (N.  Y.)  1,  7  Am.  Dec.  416;  Beck  v. 
McGlllis.  9  Barb.  (N.  Y.)  35;  Jenkins  v.  Fowler.  63  N.  H.  244.  Cf. 
Hancock  v.  Lyon,  67  N.  H.  216.  29  Atl.  638.  See,  also.'  In  re  Cald- 
well's Estate,  8  Del.  Ch.  358,  68  Atl.  525;  Shelby's  Ex'rs  v.  Shelby, 
36  Ky.  (6  Dana)  60;  American  Bible  Sec.  v.  Pratt,  9  Allen   (Mass.) 


56  DEPOSITS  (Ch.  2 

depositor  upon  his  outstanding  check  will  be  considered 
later.^" 

PAYMENT 

17.  IN  GENERAL — It  is  the  implied  agreement  of  a  bank 

to  pay  in  money  at  its  banking  house  the  amount 
standing  to  the  credit  of  a  general  depositor  upon 
his  order  or  demand.  The  order  may  be  made  by 
a  check  or  other  order  for  payment,  including,  in 
some  jurisdictions,  a  note  or  acceptance  payable  at 
the  bank,  or,  if  a  certificate  of  deposit  has  been  is- 
sued, by  the  presentment  of  the  certificate. 

18.  INTEREST — In  the  absence  of  special  agreement,  in- 

terest upon  a  deposit  is  not  payable  by  the  bank; 
but,  when  demand  for  payr.  ..nt  of  a  deposit  is  made 
and  refused,  interest  hy  way  of  damages  runs  from 
the  time  of  the  demand. 

Payment  of  Deposit — Demand 

It  is  the  obligation  of  a  bank  to  pay  its  depositor  upon  de- 
mand.^*^     "The  legal  relation  of  banker  and  depositor,  upon 

109;  Boyd  v.  Satterwhite,  12  Rich.  Eq.  (S.  C.)  487.  Cf.  Gale  v. 
Drake,  51  N.  H.  78 ;  Adams  v.  Jones,  59  N.  C.  221 ;  Wyatt  v.  Norris, 
66  W.  Va.  667,  66  S.  E.  1016.  See  ''Wills,"  Dec.  Dig.  (Key  No.)  §  566; 
Cent.  Dig.  §  1238y2. 

14C  Post,  p.  153. 

14  7  Ward  V.  Johnson,  95  111.  215;  McBee  v.  Purcell  Nat.  Bank,  1 
Ind.  T.  288,  37  S.  W.  55 ;  Aurora  Nat.  Bank  v.  Dils,  18  Ind.  App.  319, 
48  N.  E.  19 ;  Elliott  v.  Capital  City  State  Bank,  128  Iowa,  275,  103 
N.  W.  777,  1  L.  R.  A.  (N.  S.)  H30,  111  Am.  St.  Rep.  198 ;  Girard  Bank 
V.  Bank  of  Penn  Township,  39  Pa.  92,  80  Am.  Dec.  507 ;  Johnson  v. 
Shuey,  40  Wash.  22,  82  Pac.  123.  Where  a  bank  discontinues  bank- 
ing operations,  it  waives  demand.  Arnold  v.  Hart,  170  111.  -142,  52 
N.  E.  930;  ante,  p.  14. 

If  the  bank  remits  by  draft  at  the  depositor's  request,  the  risk  is 
his.  Jung  V.  Second  Ward  Savings  Bank,  55  Wis.  364,  13  N.  W.  235, 
42  Am.  Rep.  719.  Cf.  Cutler  v.  American  Exch.  Nat.  Bank,  113  N.  Y, 
593,  21  N.  E.  710,  4  L,  R.  A.  328.  See  "Banks  and  Banlying;'  Dec. 
Dig.  {Key  No.)  §  133;  Cent.  Dig.  §§  339-3.52. 


§§  17-18)  PAYMENT  57 

a  general  deposit,  is,  in  most  respects,  that  of  clel5t5r  and 
creditor.  By  the  deposit  the  latter  parts  with,  and  the  former 
acquires,  the  title  to  the  specific  money  deposited,  and  the  one 
becomes  indebted  to  the  other  in  the  amount  of  the  sum  de- 
posited. But,  by  universal  understanding  on  the  part  of  bank- 
ers and  depositors,  there  is  a  condition  attached  to  the  under- 
taking of  the  bank.  It  is  not  its  duty,  as  it  is  that  of  an 
ordinary  debtor,  to  seek  the  creditor  and  pay  him  wherever 
found ;  it  does  not  undertake  to  pay  without  respect  to  place 
— to  pay  absolutely  and  immediately.  But  its  engagement  is 
to  pay  at  its  banking  house,  when  payment  shall  be  called  for 
there."  ^*^  In  other  words,  it  is  the  duty  of  the  bank  to  pay 
upon  demand. 

Demand — How  Made 

The  demand  is  usually  made  by  the  presentment  of  a 
check,""  or,  if  a  certificate  of  deposit  has  been  issued,  by  the 
presentment  of  the  certificate.^  ^°  But,  unless  a  certificate  has 
been  issued,  no  particular  form  of  order  or  demand  is  requi- 
site.^'^ The  bank  may,  of  course,  pay  upon  an  oral  order,  if 
it  sees  fit;  "^^^  but  it  seems  that  by  the  usage  of  banks  a  bank 
may  require  a  written  order.^'^ 


148  Branch  v.  Dawson,  33  .Minn.  309,  23  N.  W.  552,  per  Gilfillan, 
C.  J.  ^ce  "Banlcs  and  Baukinp:'  Dec.  Difj.  (Key  No.)  §  133;  Cent. 
Dig.  §§  ,^.3.9-352. 

14  0  Post,  p.  OG.  1^"  Post,  p.  79. 

151  Neff  V.  Greene  County  Nat.  Bank,  89  Mo.  5S1,  1  S.  W.  747; 
Weedsport  Bank  v.  Park  Bank,  *41  N.  Y.  5G1.  -See  "BanKs  and 
Bankinv,"  Dec.  Dig.  {Key  No.)  §  133;  Oent.  Dig.  §§  330-3>,G;  ''Bills 
and  Notes,"  Dec.  Dig.  (Key  No.)  §§  .'iOO->i05;  Cent.  Dig.  §§  1066-1071. 

152  First  Nat.  Bank  of  Cambridge,  111.  v.  Hall,  119  Ala.  04,  24 
South.  526 ;  Rice  v.  Bank  of  Camas  Prairie,  5  Idaho,  39,  47  Pac.  856 ; 
McEweu  V.  Davis,  39  Ind.  109 ;  Ellis  v.  First  Nat.  Bank,  22  R.  I.  565, 
48  Atl.  936.  See  ''Bonis  and  Banking,"  Dec.  Dig.  (Key  No.)  §  133; 
Cent.  Dig.  §§  339-3-',G ;  "Bills  and  Notes,"  Dee.  Dig.  (Key  No.)  §§  .',00- 
J,05;  Cent.  Dig.  §§  1066-1011. 

153  McEweu  V.  Davis,  39  Ind.  109;  McLean  v.  Lowe,  120  Ind.  449, 
26  N.  E.  398.     See  "Banks  and  Banking."  Dee.  Dig.  (Key  No.)  §  i53; 


58  DEPOSITS  (Ch.  2 

Note  or  Acceptance  Payable  at  Bank 

Whether  a  promissory  note  or  an  acceptance  of  a  bill  of 
exchange,  by  its  terms  payable  at  the  bank,  is  equivalent  to  an 
order  to  the  bank  to  pay  the  note  or  bill  for  the  account  of 
the  maker  or  acceptor,  is  a  question  on  which  the  authorities 
conflict.  In  England  it  has  been  held  that  it  has  such  an 
effect,  and  that  the  bank,  having  funds,  is  bound  to  honor  its 
customers'  notes  and  acceptances  made  so  payable  in  the  same 
manner  as  his  checks.^ ^*  In  some  states  the  English  rule  has 
been  followed,  at  least  to  the  extent  of  holding  that  such  a 
note  confers  authority  on  the  bank  to  apply  the  maker's  de- 
posit to  its  payment,^ ^■'^  or  even,  perhaps,  to  advance  the 
amount  and  charge  it  as  a  loan  to  the  maker.  ^•'''*'  In  other 
states  it  has  been  held  that  such  a  note  is  not  equivalent  to  a 
check,  and  confers  no  authority  upon  the  bank,  but  that  by 

Cent.  Din.  §§  339-U6;  ''Bills  and  7\'otes;'  Dec.  Dig.  (Key  No.)  §§  ^00- 
Jf05;  Cent.  Dig.  §§  1066-1071. 

154  Robarts  v.  Tucker,  IG  Q.  B.  5G0;  Kymer  v.  Laurie,  18  L.  J.  Q. 
£.  218.  Sec  "Banks  and  Banking;'  Dec.  Dig.  {Key  'So.)  §  lU;  Cent. 
Dig.  §§  J,1.5,  .1,18. 

150  Bedford  Bank  v.  Acoam,  125  lud.  584,  25  N.  E.  713,  9  L.  R.  A. 
560,  21  Am.  St.  Rep.  258  (bank  may  hold  note  a.s  purchaser  and  set 
off  against  deposit) ;  Griffin  v.  Rice,  1  Hilt.  (N.  Y.)  184 ;  Indig  v. 
National  City  Bank  of  Brooklyn,  80  N.  T.  100;  Francis  v.  People's 
Nat.  Bank,  1  Ohio  N.  P.  281.  See,  also,  Lazier  v.  Horau,  55  Iowa, 
75,  7  N.  W.  457,  39  Am.  Rep.  1G7  (cf.  Bank  of  INIontreal  v.  Ingerson, 
105  Iowa,  349,  75  N.  W.  351) ;  Stone  v.  Demarest,  G7  App.  Div.  .549, 
73  N.  Y.  Supp.  903 ;  Riverside  Bank  v.  First  Nat.  Bank,  74  Fed.  27G, 
20  C.  C.  A.  181. 

The  maker  may  withdraw  the  authority  before  the  bank  has  acted. 
Egerton  v.  Fulton  Nat.  Bank,  43  How.  Prac.  (N.  Y.)  216. 

A  deposit,  with  direction  to  apply  to  a  note,  does  not  appropriate  it 
to  that  purpose,  so  that  the  holder  can  recover  from  the  bank, 
^tna  Nat.  Bank  v.  Fourth  Nat.  Bank  of  City  of  New  York,  4G  N.  Y. 
82,  7  Am.  Rep.  314.  See  "lianks  and  Banking,"  Dec.  Dig.  {Key  Xo.) 
§  lU;  Cent.  Dig.  §§  .',15-418. 

156  See  Mandeville  v.  Union  Bank,  9  Cranch,  9.  3  L.  Ed.  6.39.  Sec 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  1.',.',;  Cent.  Dig.  §§  .',15- 
418. 


§§  17-18)  PAYMENT  59 

making  the  note  payable  at  the  bank  the  maker  sinipiy  fixes 
the  place  of  presentment  for  convenience  in  chanj^-ing  in- 
dorsers/"  In  states  which  have  enacted  the  Negotiable  In- 
struments Law  this  question  is  set  at  rest  by  the  provision  that 
"where  the  instrument  is  made  payable  at  a  bank  it  is  equiva- 
lent to  an  order  to  the  bank  to  pay  the  same  for  the  account 
of  the  principal  debtor  thereon."  ^'* 

Payment  in  Money 

The  obligation  of  the  bank  is  to  pay  in  money ;  that  is,  in 
legal  tender.  If  it  credits  the  account  of  the  depositor  with 
money,  it  is  not  relieved  of  the  obligation  to  pay  money  be- 
cause the  deposit  was  made  in  funds  that  were  not  legal  ten- 
der/^" or  in  depreciated  bills/ °°  or  in  bills  that  have  subse- 
quently depreciated/"^     Conversely,  it  may  pay  in  a  form  of 


1^7  Wood  V.  Merchants'  Ravings,  I.oiin  &  Trust  Co.,  41  111.  2()7; 
Kidgcly  Nat.  Bank  v.  I'atton,  100  111.  479:  Grissoni  v.  Connnercial 
Nat.  Rank,  87  Tonn.  SHO.  10  S.  W.  774.  3  L.  R.  A.  273.  10  Am.  St.  Rep. 
(JtKI  (citing  authorities).  See.  also,  National  Exch.  Rank  v.  National 
Bank  of  North  America,  132  Mass.  147;  Elliott  v.  Worcester  Trust 
Co.,  189  Mass.  542,  75  N.  E.  944 ;  Citizens'  Bank  of  Steubenville  v. 
Carson.  32  Mo.  191 ;  Adams  v.  Hackensack  Improvement  Commis- 
sion, 44  N.  J.  Law,  038,  43  Am.  Rep.  40(>.  -See  "Banlcs  and  Banking" 
Dec.  Dig.  (Key  A'o.)  §  V,J,;  Cent.  Dip.  §§  ^15-Jil8. 

158  Negotiable  Instruments  Law,  §  87.  See  ''Bunls  anil  nuiikinfi." 
Dee.  Dig.  (Key  'Xo.)  §  H',;  Cent.   Dig.  S§  .', /.5-.'/iN. 

i59Corblt  V.  President,  etc..  of  Rank  of  Smyrna,  2  liar.  (Del.)  23.j, 
30  Am.  Dee.  G35.  See  "Bank.s  and  Banking,"  Dec.  Dig.  {Kig  Xo.)  § 
J 33;  Cent.  Dig.  §§  3.',7-350. 

i«o  Bank  of  Kentucky  v.  Wister,  2  Pet.  318,  7  L.  Ed.  437  (bills  of 
depositary  bank  passing  at  50  per  cent,  discount).  -S'cc  "Banks  and 
Bunking,-'  Dec.  Dig.  (Key  NjO.)  §  133;  Cent.  Dig.  §§  31,1-350. 

i«i  Marine  Rank  of  Chicago  v.  Chandler,  27  111.  ">2rt,  81  Am.  Dec. 
249:  Chicago  Marine  &  Fire  Ins.  Co.  v.  Carpenter.  28  111.  3(;0:  Wil- 
lets  V.  Paine.  43  111.  432. 

Rut,  where  Confederate  treasury  notes  were  dei)osited  while  such 
notes  were  bankable  funds,  the  depositor  could  not  recover  the 
amount  as  deiwsited  in  money.  Foster  v.  Rank  of  New  Orleans.  21 
La.  Ann.  338.     vSee.  also.  Dabney  v.  Bank  of  State,  3  S.  C.  124.     See 


60  DEPOSITS  (Ch.  2 

legal  tender  that  is  less  valuable  than  was  the  money  deposited. 
Thus  it  was  held  that  a  bank  might  pay  in  treasury  notes  made 
legal  tender  after  the  deposit  by  the  Legal  Tender  A9t.^®^ 

Interest  on  Deposits 

Interest  is  not  payable  upon  a  deposit  in  the  absence  of 
agreement  therefor.^^^    A  bank  may,  however,  make  itself  lia- 

^'Banks  and  Banking^'  Dec.  Dig.  (Key  No.)  §  133;  Cent.  Dig.  §§  3^7- 
^50. 

162  Thompson  v.  Riggs,  5  Wall.  6G3,  18  L.  Ed.  704;  Gumbel  v. 
Abrams,  20  La.  Ann.  5G8.  90  Am.  Dec.  426.  See,  also,  Carpenter  v. 
Xortlifleld  Bank,  39  Vt.  46.  Cf.  Chesapeake  Bank  v.  Swain,  29  Md. 
483.  -See  "Banks  and  Banking,"  Dec.  Dig.  {Key  A^o.)  §  133;  Cent. 
Dig.  §§  347-350. 

163  Hilburn  v.  Mercantile  Nat.  Bank  of  Pueblo,  39  Colo.  189,  89 
Pac.  45 ;  First  Nat.  Bank  of  Springfield  v.  Coleman,  11  111.  App.  508 ; 
Clark's  Adm'r  v.  Farmers'  Nat.  Bank  of  Richmond,  124  Kj'.  563,  99 
S.  W.  674;  Cohen  v.  St.  Louis  Perpetual  Ins.  Co.,  11  Mo.  374;  Par- 
sons V.  Treadwell,  50  N.  H.  356 ;  Ex  parte  Stockman,  70  S.  C.  31,  48 
S.  E.  736,  106  Am.  St.  Rep.  741 ;  Parkersburg  Nat.  Bank  v.  Als,  5 
W.  Va.  50. 

Where  the  bank  pays  a  check  under  a  forged  indorsement,  in  an 
action  by  the  depositor  for  the  amount  so  charged  to  his  account,  he 
is  not  entitled  to  interest  from  the  date  of  payment.  Atlanta  Nat. 
Bank  v.  Burke,  81  Ga.  597,  7  S.  E.  738,  2  L.  R.  A.  96.  Contra:  Ger- 
man Sav.  Bank  of  Davenport  v.  Citizens'  Nat.  Bank,  101  Iowa,  530, 
70  N.  W.  709,  63  Am.  St.  Rep.  399. 

Certain  funds  of  an  insolvent,  which  were  claimed  by  several  cred- 
itors, one  of  them  a  bank,  were,  by  an  order  of  court,  which  was 
made  by  the  consent  of  all  the  parties  in  interest,  paid  to  the  bank ; 
it  agreeing  to  pay  them  over  to  the  court's  order,  if  it  was  finally  de- 
cided that  the  bank  was  not  entitled  to  them.  Meantime  the  bank 
used  the  funds  as  its  own.  Held,  where  the  furids  were  afterwards 
ordered  to  be  paid  over,  that  the  bank  was  liable  for  interest  thereon 
for  the  time  it  held  and  used  them.  Kenton  Ins.  Co.  v.  First  Nat. 
Bank,  9.5  Ky.  129,  19  S.  W.  185.  Cf.  Haswell  v.  Farmer-s'  &  Me- 
chanics' Bank,  26  Vt.  100.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  132;  Cent.  Dig.  §  351. 


§§  19-21)       bank's  likx  or  kigiit  of  set-off  (51 

ble  to  pay  interest  by  agreement.^*'''  It  is  the  implied  ^enitract 
of  a  bank  to  i)ay  the  anionnt  credited  to  the  depositor  upon 
demand,  and  after  his  demand,  and  refusal  by  the  bank  to 
pay,  interest  runs  upon  the  depos'.t  by  way  of  damages. ^"'^  If 
no  demand  is  made,  and  action  to  recover  the  amount  of  a 
deposit  is  brought,  interest  runs  from  the  commencement  of 
the  action.^""  liut  where  the  bank  suspends  payment,  so  that 
demand  would  be  futile,  interest  runs  from  the  date  of  sus- 
pension.^^^ 


BANK'S  LIEN  OR  RIGHT  OF  SET-OFF 

19.  IN  GENERAL — A  bank  has  a  so-called  lien  upon  a 
general  deposit,  or  a  right  of  set-off,  by  virtue  of 
which  it  may  apply  the  deposit  to  the  payment  of 
any  matured  unsecured  debt  of  the  depositor;  and 
in  many  jurisdictions,  upon  the  insolvency  of  the 

1C4  Boyd's  Ex'r  v.  First  Nat.  Bank  of  Williamsburg,  12S  Ky.  468, 
108  S.  W.  360 ;  Linn  Ck)unty  v.  Farmers'  &  Merchants'  Bank,  175  Mo. 
539,  75  S.  W.  393;  Pelham  v.  Adams,  17  Barb.  (N.  Y.)  384;  Mc- 
Loghlin  V.  National  Mohawk  Valley  Bank,  139  N.  Y.  514,  34  N.  E. 
1095. 

The  payment  of  interest  on  deposits  ici  sometimes  restrained  by 
statute.  Haniium  v.  Bank  of  Tennessee,  41  Tenn  398  See  ''Banks 
and  Bankinfi."  Dec.  Dig.  (Key  Xo.)  §  132;  Cent.  Dig.  §  Sol. 

165  Morse  v.  Rice.  36  Neb.  212,  54  N.  W.  308.  Set  "Banks  and 
Banking^  Dec.  Dig.  (Key  No.)  §  132;  Cent.  Dig.  §  351. 

leoBobb  V.  Savings  Bank  (Ky.)  64  S.  W.  494;  Watson  v.  Presi- 
dent, etc.,  of  I'hoenix  Bank,  8  Mete.  (Mass.)  217,  41  Am.  Dec.  500: 
Morse  v.  Rice,  36  Neb.  212,  54  N.  W.  308.  Cf.  Cooper  v.  Townsend. 
59  Hun,  624,  13  N.  Y.  Supp.  700. 

Where  a  depositor  is  sued  upon  his  note  to  the  tank,  -and  by 
counterclaim  seeks  to  have  a  deposit  set  off,  interest  runs  on  the 
deposit  from  service  of  the  answer.  Sickles  v.  Herold,  149  N.  Y. 
332,  43  N.  E.  852.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.) 
§  132;    Cent.  Dig.  §  351. 

*67  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  7S8,  30  I^  Ed.  864  ; 
Ex  parte  Stockman,  70  S.  C.  31,  48  S.  E.  736.  106  Am.  St.  Rep, 
741.     Cf.  Paiten  v.  American  Nat.  Bank   of  Denver,  15  Colo.   App. 


62  DEPOSITS  (Ch.  2 

depositor,  the  bank  may  exercise  this  right,  even 
if  the  debt  is  not  matured. 
20.  DEPOSIT  MADE  AND  DEBT  OWING  IN  DIF- 
FERENT CAPACITIES— To  entitle  the  bank  to 
exercise  its  right  of  lien  or  set-off,  the  debt  must 
be  due  from  the  depositor  in  the  same  capacity  in 
which  he  is  entitled  to  the  deposit.  But  by  the 
better  rule  the  bank  may  exercise  this  right  in  re- 
spect to  a  deposit,  although  it  equitably  belongs 
to  another  than  the  person  in  whose  name  it  stands, 
provided  the  bank  is  without  notice  of  the  adverse 
equitable  ownership. 

CI.  RIGHT  OF  SURETY  TO  HAVE  DEPOSIT  AP- 
PLIED— Whether  a  bank  discharges  a  surety  of  a 
debt  of  a  depositor  by  failing  to  exercise  its  right 
of  lien  or  set-off,  and  paying  the  deposit  to  the  de- 
positor, is  a  question  on  which  the  courts  axe  di- 
vided.        , 

]n  General 

A  bank  has  a  right  to  appropriate  the  funds  due  upon  a 
general  deposit  to  the-  payment  of  any  debt  due  to  the  bank 
from  the  depositor."®    This  right  is  sometimes  called  a  bank- 

479,  63  Pac.  424;  Forschirm  v.  Mechanics'  &  Traders'  Bank,  ^l.S7 
App.  Div.  149,  122  N.  Y.  Supp.  168.  See  "Banks  and  Banking" 
Dec.  Di<j.  {Key  :So.)  §  lii2;    Cent.  Dig.  §  351. 

168  Dawson  v.  Real  Estate  Bank,  5  Ark.  283;  Town  of  Manitou 
V.  Mrst  Nat.  Bank  of  Colorado  Springs,  37  Colo.  344,  86  Pac.  75; 
McDowell  V.  President,  etc.,  of  Bank  of  Wilmington  &  Brandywine, 
1  Har.  (Del.)  369;  Home  Nat.  Bank  v.  Newton,  8  111.  App.  .563; 
Bedford  Bank  v.  Acoam,  125  Ind.  584,  25  N.  E.  713,  9  L.  R.  A. 
560.  21  Am.  St.  Rep.  258 ;  Aurora  Nat.  Bank  v.  Dils.  18  Ind.  App. 
319,  48  N.  E.  19 ;  Knapp  v.  Co  well,  77  Iowa,  528.  42  N.  W.  434 ;  Citi- 
zens' Bank  of  Garnett  v,  Bowen,  21  Kan.  354 ;  Muench  v.  Valley  Nat. 
Bank,  11  Mo.  App.  14-"  .  Commercial  Bank  of  Albany  v.  Huirhes, 
17  Wend.  (N.  Y.)  94;  President,  etc  of  State  I.ank  v.  Armstrong, 
15  N.  C.  519;    Schuler  v.  Laclede  Bank  (C.  C.)  27  Fed.  425;    Durkee 


§§  19-21)       bank's  likx  or  uic.iit  of  set-off  03 

er's  Hen,  but  the  right  of  the  bank  is  rather  a  rij4;ht  fo'*'set  off 
against  the  depositor's  demand  against  the  liank  its  own  de- 
mand against  the  depositor.  "Though  the  right  is  called  a 
iien.'  strictly  it  is  not,  when  api)lied  to  a  general  deposit,  for 
a  person  cannot  have  a  lien  ujwn  his  own  property,  but  only 
on  that  of  another;  and  *  *  *  the  funds  of  general  de- 
posit in  a  bank  are  the  property  of  the  bank.  Properly  speak- 
ing, the  right  *  *  *  is  that  of  set-off,  arising  from  the 
existence  of  mutual  demands.  The  practical  effect,  hoWever, 
is  the  same.  The  cross-demands  are  satisfied,  so  far  as  they 
are  eciual,  leaving  whatever  balance  may  be  due  on  either  as 
the  true  amount  of  the  indebtedness  from  one  party  to  the 
other."  '"'■'  The  bank  may,  therefore,  retain  the  deposit  until 
payment  of  the  debt;  and  it  may  itself  apply  the  deposit  in 
payment.  The  consent  of  the  depositor  to  the  application  is 
not  essential. ^^° 

The  bank  may  exercise  its  right  of  lien  or  set-off,  as  against 
an  executor  of  the  depositor,^ ^^   against  his  assignee  in  in- 

;•.  National  Bank  of  Florida.  102  Fed.  845.  42  C.  C.  A.  r,74.  See 
-Banks  and  Banking,"  Dec.  DUj.  (Key  Xo.)  §§  13J,,  136;  Cent.  DUj. 
SS  3.5.9-37'/. 

i<i9  liank  (if  Maiysville  v.  Wiiidiscli  Mulilhauser  Brewing  Co..  50 
Ohio  St.  1.51.  83  N.  E.  1(»54.  40  Am.  St.  Kep.  COO.  See.  also.  Furber 
.-.  r)ane.  203  Mass.  lOS.  80  N.  E.  227;  Wynn  v.  Tallapoosa  County 
Bank.  108  Ala.  400.  .53  South.  228.  See  "Banks  ami  JUinkinfj."  Dec. 
Dii).  {Key  Xo.)   §§  13',.  136;    Cent.   Dif/.  §S   353-37-',. 

170  Bank  of  Marysville  v.  Windisch  Mublliauser  Brewing  Co..  .50 
Ohio  St.  151.  33  N.  E.  1054,  40  Am.  St.  Hep.  000. 

In  Callaham  v.  Bank  of  Anderson,  00  S.  C.  374,  4S  S.  E.  203. 
it  was  held  by  a  divided  court  that  where  a  bank  applied  a  fund 
on  deposit  to  the  depositor's  debt,  and  without  notice  to  -him  re- 
fused to  pay  his  cheek  in  favor  of  a  third  person,  it  was  liable  to 
he  depositor  for  the  resulting  damages.  In  no  other  case  is  notice 
made  requisite  to  the  exercise  of  the  bank's  right.  See  IS  Harv. 
Law  Rev.  .=il0.  Sfee  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§ 
13.',,  136;    Jent.  Dig.  §§  .3o3-J7//. 

171  Little's  Adm'r  v.  City  Nat.  Bank,  115  Ky.  020.  74  S.  W.  OlHt. 
103  Am.  St.  Rep.  340.  See  "Banks  and  Banking."'  Dec.  Dig.  (A'c// 
No.)  §§  13-',,  136;   Cent.  Dig.  §§  353-37.',. 


64  DEPOSITS  (Ch.  2 

I 

solvency,^ ''^  or  the  receiver  of  a  depositor  corporation,^'''^  or 
against  a  trustee  in  bankruptcy.^"*  The  right  is  superior  to 
that  of  a  creditor  of  the  depositor  upon  attachment  or  gar- 
nishment of  the  deposit.^'^ 

The  right  of  the  bank,  being  a  right  of  set-off,  can  ordi- 

172  Clark  V.  Northampton  Nat.  Bank,  160  Mass.  26,  35  N.  E.  108; 
Delahunty  v.  Central  Nat.  Bank,  03  App.  Div.  177,  71  N.  Y.  Supp. 
.416.  See  "Banks  and  Banking;'  Dec.  Big.  {Key  Islo.)  §§  ISJt,  136; 
Cent.  Dig.  §§  353-31-',. 

i73Wheaton  v.  Daily  Telegraph  Co.,  324  Fed.  61,  59  C.  C.  A. 
42i  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  ^^o.)  §§  134,  136; 
Cent.  Dig.  §§  353-37',. 

1"*  Insolvents  by  depositing  in  a  bank  do  not  thereby  make  a 
transfer  of  property  amounting  to  a  preference,  which  under  the 
bankruptcy  act  (Act  July  1,  1898,  c.  541,  30  Stat.  544  [U.  S.  Comp. 
St.  1901,  p.  3418])  will  deprive  the  bank  of  its  right  to  set  off  the 
amount  of  such  deposit  remaining  to  the  depositor's  credit  on  the 
date  of  the  adjudication  in  bankruptcy  and  to  prove  its  claim 
against  the  bankrupt's  estate  for  the  balance.  New  York  County 
Nat.  Bank  v.  Massey,  192  U.  S.  138,  24  Sup.  Ct.  199,  48  L.  Ed. 
380. 

An  insolvent  corporation  deposited  funds  in  defendant  bank,  which 
held  its  notes,  some  payable  on  demand,  and  another  not  due.  By 
checks  drawn  cm  the  deposit  within  four  months  of  its  bankruptcy 
it  paid  the  notes,  including  the  one  not  due,  which  did  not  mature 
till  after  the  bankruptcy.  The  checks  were  given  intending  a 
preference,  and  were  therefore  voidable  under  the  New  York  stock 
corporation  law  (Consol.  Laws  1909,  p.  59^) ;  but,  as  the  bank  had 
not  knowledge  of  the  insolvency,  the  payments  were  not  voidable 
as  a  preference  under  the  bankruptcy  law.  Held,  that  the  trustee 
in  bankruptcy  could  recover  the  payments  only  to  the  extent  of 
the  note  which  was  not  due,  since  as  to  the  demand  notes  the 
bank  had  a  lien  or  right  of  set-ofC,  which  it  could  exercise  as  against 
the  bankrupt  or  its  trustee.  Irish  v.  Citizens'  Trust  Co.  of  Utica, 
N.  Y.  (D,  C.)  163  Fed.  880.  See  "Banks  and  Banking;'  Dec.  Dig. 
(Key  yo.)  §§  13Jf,  136;    Cent.  Dig.  §§  353-374- 

175  Schuler  v.  Israel.  120  U.  S.  506,  7  Sup.  Ct.  648,  30  L.  Ed. 
707;  Wuuderlich  v.  Merchants'  Nat.  Bank,  109  Minn.  468,  124  N. 
W.  223,  27  L,  R.  A.  (N.  S.)  811,  134  Am.  St.  Rep.  788.  See  "Banks 
and  Banking;'  Dec.  Dig.  {Key  No.)  §.5  13.',,  136;  Cent.  Dig.  §§  353- 
374. 


§§  19-21)       bank's  lien  or  right  of  set-off  Go 

narily  be  exercised  only  in  respect  to  a  debt  of  the  depositor 
that  has  matured. ^^"  Insolvency,  however,  is  a  distinct 
ground  of  set-off,  and  if  the  depositor  be  insolvent  it  is  gener- 
ally held  that  the  bank  may  set  off  against  tlie  deposit  a  debt, 
notwithstanding  that  it  is  unmatured. ^^^  But  some  courts 
confine  the  right,  even  upon  insolvency,  to  matured  debts.^'" 

17 c  BirniinKhaiu  Nat.  Bank  v.  Mayer,  104  Ala.  034,  10  South. 
520;  Coiiiniercial  Nat.  Bank  v.  Proctor,  98  111,  558;  Wiley  v. 
Blinker  Hill  Nat.  Bank.  183  Mass.  495,  07  N.  E.  055;  Gardner  v. 
First  Nat.  Bank  of  Billinj;s,  10  Mont.  149.  25  Pac.  29,  10  L.  R.  A. 
45  (holding  that  authority  to  apply  deposits  to  notes  before  their 
maturity  ceased  at  the  depositor's  death) ;  Jordan  v.  National 
Shoe  &  Leather  Bank  of  New  York.  74  N.  Y.  407,  30  Am.  Rep. 
319;  Heidelbach  v.  National  Park  Bank,  S7  Hun,  117,  33  N.  Y. 
Supp.  794;  Smith  v.  Eighth  Ward  Bank,  31  App.  Div.  0,  52  N. 
Y.  Supp.  290;  Appeal  of  Farmers'  &  Mechanics'  Bank,  48  Pa.  57; 
Bank  of  Spartanburg  v.  Mahon,  78  S.  C,  408,  59  S.  E.  31;  Irish 
V.  Citizens'  Trust  Co.  of  Utica,  N.  Y,  (D.  C.)  163  Fed.  880.  See 
"Banlcs  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  134,  136;  Cent.  Dig. 
§§  353-37//. 

177  Georgia  Seed  Co.  v.  Tahnadge  &  Co.,  96  Ga.  254,  22  S.  E, 
1001;  Thomas  v.  Exchange  Bank  of  An^us,  99  Iowa,  202,  OS  N. 
W.  780,  35  L.  R.  A.  379;  Kentucky  Flour  Co.'s  Assignee  v.  Mer- 
chants' Nat.  Bank,  90  Ky.  225.  13  S.  W.  910,  9  L.  R.  A.  108;  Dem- 
mon  V.  President,  etc.,  of  Boylston  Bank,  5  Cush.  (Mass.)  194; 
Stolze  V.  Bank  of  Minnesota,  07  Minn.  172.  09  N.  W.  813;  Sweet- 
ser  V.  People's  Bank  of  Minneapolis,  09  Minn.  196,  71  N.  W.  934; 
Nashville  Trust  Co.  v.  Bank,  91  Tenn.  336,  18  S.  W,  822,  15  L. 
R.  A.  710;  Ford's  Adm'r  v.  Thornton,  30  Va.  095;  Schuler  v. 
Israel,  120  U.  S.  500,  7  Sup.  Ct.  048,  30  L.  Ed.  707. 

A  bank  summoned  as  garnishee  in  an  action  against  a  depositor 
may  set  off  against  his  deposit  unmatured  notes  where  he  is  in- 
solvent. Wunderlich  v.  Merchants'  Nat.  Bank,  109  Minn.  .408,  124 
N.  W.  223,    27  L.  R.  A.  (N.  S.)  811.  134  Am.  St.  Rep.  788. 

Upon  the  bank's  insolvency  the  deposit. may  be  set  off  upon  an 
unmatured  note.  Scott  v.  Armstrong,  140  U.  S.  499,  13  Sup.  Ct. 
148,  30  L.  Ed.  1059.  Post,  p.  74.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  S§  13J,,  136;    Cent.  Dig.  §§  353-37//. 

178  Homer  v.  National  Bank  of  Commerce,  140  Mo.  225,  41  S. 
W.  700;  Kortjohn  v.  Continental  Nat.  Bank  of  St.  Louis,  03  Mo. 
App.  100;    Ellis  v.  First  Nat.  Bank,  22  R.  I.  565.  48  Atl.  9.36;    Oat- 

TIFF.BKS.&  B.— 5 


66  DEPOSITS  (Ch.  2 

It  seems  that  if  a  bank  has  a  contingent  claim,  or  a  claim  for 
unliquidated  damages,  arising  by  contract  against  a  bankrupt 
depositor,  the  deposit  may  be  retained  by  the  bank  until  it  be 
ascertained  what  the  principle  debt  is,  if  any,  and  then  it  can 
be  used  as  a  set-off. ^'^®  The  bank  may  apply  a  deposit  to  pay- 
ment of  a  demand  note,^^°  and  to  an  overdraft  by  the  depos- 
itor.^«i 

The  fact  that  checks  of  the  depositor  are  outstanding  does 
not  affect  the  bank's  lien  or  right  of  set-off. ^^^  But  in  Illinois, 
where  a  check  was  held  to  be  an  assignment,  it  has  been  held 
that  the  rights  of  the  holder  became  fixed  upon  presentment, 
and  that  thereupon  his  rights  were  superior  to  the  right  of  the 

man  v.  Batavian  Bank.  77  Wis.  501,  46  N.  W.  881,  20  Am.  St. 
Rep.  136.  The  right  given  to  a  bank  by  a  contract  with  a  deposit- 
ing and  borrowing  corporation  to  declare  any  indebtedness  of  the 
corporation  due  and  payable  at  once  in  case  of  its  insolvency,  and 
to  apply  thereon  any  money,  credits,  or  other  property  of  the 
corporation  then  in  the  hands  of  the  bank,  does  not  create  a  lien 
on  any  such  funds  or  credits,  but  merely  gives  the  bank  an  option, 
which  cannot  be  exercised  after  a  receiver  has  been  appointed  for 
the  corporation  in  insolvency  proceedings.  Corn  Exch.  Nat.  Bank 
V.  Locher  et  al.,  151  Fed.  764,  81  C.  O.  A.  388.  See  "Banks  and 
Banl-ing,"  Dec.  Dig.  {Key  No.)  §§  13-',,  136;    Cent.  Dig.  §§  555-37'^. 

17  8  Ex  parte  Howard  Nat.  Bank,  Fed.  Cas.  No.  6,704,  2  Lowell, 
487. 

An  unlictuidated  claim  in  favor  of  the  bank,  against  the  person 
whose  account  is  attached,  growing  out  of  his  mismanagement 
while  cashier  of  the  bank,  cannot  be  offset  against  a  balance  to 
his  credit.  Irvine  v.  Dean,  93  Tenn.  346,  27  S.  W.  666.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§  13J,,  136;  Cent.  Dig.  §§  353- 
37.',. 

180  Citizens'  Savings  Bank  v.  Vaughau,  115  Mich.  156,  73  N. 
W.  143;  Irish  v.  Citizens'  Trust  Co.  of  Utica,  N.  Y.  (D.  C.)  163 
Fed.  880.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  13.',, 
136;    Cent.  Dig.  §§  353-31J,. 

181  Post,  p.  84. 

18  2  Bank  of  Marjsville  v.  Windisch  Muhlhauser  Brewing  Co.,  50 
Ohio  St.  151,  33  N.  E.  1054,  40  Am.  St.  Rep.  660;  post,  p.  127. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Ifo.)  §§  13^,  136;  Cent. 
Dig.  §§  353-37.',. 


§§  19-21)       bank's  lien  or  right  of  set-off  G7 

bank  thereafter  to  apply  the  deposit  to  a  debt  of  the  (}^pl3sil(Jr, 
although,  were  a  check  presented  by  the  depositor  himself, 
the  bank  might  still  appropriate  the  deposit  to  the  debt.^*^ 
In  Iowa,  where,  also,  a  check  has  been  held  to  be  an  assign- 
ment, the  holder  had  no  greater  right  in  this  regard  than  the 
depositor  himself.^ "^^ 

A  bank  may  not  apply  a  deposit  to  a  debt  that  is  secured.^ ^"^ 

Deposit  Made  and  Debt  Ozm)ig  in  Different  Capacities 

To  entitle  the  bank  to  assert  its  lien  or  set-ofF,  the  debt 
must  be  due  from  the  depositor  in  the  same  capacity  as  that 
in  which  he  is  entitled  to  the  deposit.^®"  For  example,  where 
a  bank  deals  with  a  depositor  as  trustee,  and  recognizes  the 
deposit  as  a  trust  fund,  it  cannot  apply  it  to  the  payment  of 
his  individual  debt.^^^     So,  if  the  bank  has  knowledge  or  no- 

issNiblack  V.  Park  Nat.  Bank,  169  111.  517,  48  N.  E.  438,  39 
L.  R.  A.  159,  Gl  Am.  St.  Rep.  203;  Wymau  v.  Ft.  Dearborn  Nat. 
Bank,  181  111.  279,  54  N.  E.  94G,  48  L,  R.  A.  565,  72  Am.  St.  Rep. 
259;  Bank  of  Commerce  v.  Franklin.  90  111.  App.  91.  -S'ee  •'Banha 
and  Banling,"  Dec.  Dig.  (Key  -To.)  §§  13'/,  136;  Cent..  Dig.  §§  353- 
37//. 

18  4  Thomas'  v.  Exchange  Bunk  of  Angns,  99  Iowa,  202,  68  N. 
W.  780,  35  L.  R.  A.  379.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
2\'o.)  §§  ISh  136;   Cent.  Dig.  §§  3J.3-374. 

1S5  McKean  v.  German- American  Savings -Bank,  118  Cal.  334, 
50  Pac.  656;  Furber  v.  Dane,  203  Mass.  108,  89  N.  E.  227.  t^ee 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  IS-i,  136;  Cent.  Dig. 
§§  353-37J,. 

186  Johnson  v.  Payne  &  Williams  Bank,  56  Mo.  App.  257;  Baker 
V.  New  York  Nat.  Exch.  Bank,  100  N.  Y.  31,  2  N.  E.  452,  53  Am. 
Rep.  150;  Hodirin  v.  People's  Nat.  Bank,  125  N.  C.  503,  34  S.  E. 
709;  Tobey  v.  Manufacturers'  Nat.  Biink,  9  R.  I.  236;  Nolting  v. 
National  Bank  of  Virginia,  99  Va.  54,  37  S.  E.  804.  Sec  "Banks 
and  Banking,"  Dec.  Dig.   {Key  yo.)   §   13',;    Cent.  Dig.   §§  353-37//. 

187  United  States  v.  National  Bank  (C.  C.)  73  Fed.  379;  Mc- 
Dowell V.  Bank  of  Wilmington  &  Brandywine,  2  Del.  Ch.  1;  State 
Bank  of  St.  John  v.  McCabe,  135  Mich.  479,  98  N.  W.  20 :  Bank  of 
Greensboro  v.  Clapp,  76  N.  C.  482;  Wagner  v.  Citizens'  Bank  & 
Trust  Co.,  122  Tenn.  164,  122  S.  W.  24.5.  135  Am.  St.  Rep.  869 ; 
Sayre  v.  Weil,  94  Ala.  466,  10  South.   546.  15  L.   R.  A.  544.     See 


68  DEPOSITS  (Ch.  2 

tice  that  the  deposit  is  a  trust  fund,  it  cannot  thereafter  thus 
apply  it.^^®  So  a  specific  deposit,  received  under  an  agree- 
ment that  it  is  to  be  appHed  to  a  particular  purpose,  cannot  be 
applied  to  the  depositor's  debt.^*^  So,  if  a  bank  which  is  a 
creditor  of  an  insolvent  estate  receives  a  deposit  from  the  re- 
ceiver, it  cannot  apply  such  deposit  on  its  claim,  or  plead  it 
as  an  ofif  set.^'^*^  So  a  bank  which  deals  with  a  depositor  as 
agent,  and  recognizes  the  deposit  as  the  fund  of  the  principal, 
cannot  apply  it  to  the  payment  of  the  agent's  personal  debt;  ^^^ 

"BanKs  and  Banking,"  Dec.  Dig.   {Key   'So)   §   i3-J;    Cent.  Dig.   §§ 

18  8  American  Trust  &  Banking  Co.  v.  Boone,  102  Ga.  202,  29  S. 
E.  182,  40  L.  R.  A.  250.  66  Am.  St.  Rep.  167;  Clemmer  v.  Drovers' 
Nat.  Bank,  157  111.  206,  41  N.  E.  728 ;  Bundy  v.  Town  of  Monticello, 
84  Ind.  119;  Shepard  v.  Meridian  Nat.  Bank,  149  Ind.  532,  48 
N.  E.  346;  First  Nat.  Bank  v.  Greene  (Ky.)  114  S.  W.  322;  First 
Nat.  Bank  v.  Eastern  Trust  &  Banking  Co.  (Me.)  79  Atl.  4 ;  Nehawka 
Bank  v.  Ingersoll,  2  Neb.  (Unof.)  617,  89  N.  W.  618;  Jamison  v. 
Howard  Lock  wood  &  Co.,  26  Misc.  Rep.  730,  56  N.  Y.  Supp.   1085. 

Debts  of  a  partner  and  his  firm  to  a  bank  cannot  in  equity  be 
set  off  by  its  receiver  against  trust  moneys  which  the  partner,  after 
the  debts  were  conti*acted,  mingled  with  the  firm'  deposits,  without 
the  bank's  knowledge,  and  the  whole  amount  of  which  remained 
continuously  in  the  bank  till  it  failed.  Fisher  v.  Knight,  61  Fed. 
491,  9  C.  C.  A.  582.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key 
Xo.)  §  134;    Cent.  Dig.  §§  353-37^ 

1S9  Wilson  V.  Dawson,  52  Ind.  513;  Smith  v.  Sanborn  State  Bank, 
147  Iowa,  640,  126  N.  W.  779,  30  L.  R.  A.  (N.  S.)  517,  140  Am. 
St.  Rep.  336;  First  Nat.  Bank  v.  Brager  (Ky.)  115  S.  W.  726; 
Judy  V.  Farmers'  &  Traders'  Bank,  81  Mo.  404;  Straus  v.  Trades- 
man's Nat.  Bank  of  New  York,  122  N.  Y.  379,  25  N.  E.  372 ;  Bank 
of  United  States  v.  Macalester,  9  Pa.  475 ;  Wagner  v.  Citizens'  Bank 
&  Trust  Co.,  122  Tenn.  164,  122  S.  W.  245,  135  Am.  St.  Rep.  869. 
Cf.  Clark  v.  Northampton  Nat.  Bank,  160  Mass.  26,  35  N.  E.  108. 
^^ee  "Banks  and  Banking,"  Dec.  Dig.  {Key  So.)  §  13.^;  Cent.  Dig. 
§§  353-37J,. 

190  State  V.  Corning  State  Sav.  Bank,  128  Iowa,  597,  105  N.  W. 
159.  See,  also,  Lawrence  v.  Bank  of  Republic,  35  N.  Y.  320.  See 
Banking,"  Dec.  Dig.  {Key  So.)  §  13^;  Cent.  Dig.  §§  353-37//. 

101  Central  Nat.  Bank  v.  Connecticut  Mut.  Life  Ins.  Co.,  104  U. 


§§  19-21)       bank's  lien  ok  kiciiit  of  set-off  69 

nor  can  it  thus  apply  the  deposit  if  it  has  notice  or  knowledge 
that  the  deposit  is  that  of  the  principal.* ®- 

A  different  question  is  presented  where  the  bank  applies  to 
the  payment  of  a  debt  of  a  depositor  a  deposit  standing  in  his 
name,  without  knowledge  or  notice  that  the  deposit  equitably 
belongs  to  another.  If  money  were  paid  by  a  debtor  to  the 
bank  without  notice  to  it  that  the  money  was  equitably  an 
other's,  the  amount  could  not  be  recovered  from  the  bank  by 
the  equitable  owner.  Where  the  debtor  deposits  money,  or 
paper  which  the  bank  collects  and  places  to  the  depositor's 
account,  and  the  bank,  without  notice  of  adverse  equitable 
ownership  of  the  deposit,  applies  it  to  the  payment  of  the 
depositor's  debt,  the  situation  is  substantially  the  same ;  anc 
upon  this  ground  it  has  been  properly  held  that  in  such  case 
the  bank  is  protected  and  the  equitable  owner  has  no  right  of 
recovery  against  the  bank.^°^     Other  courts,  however,  hold 

S.  54,  2G  L.  Ed.  693.     Sec  ''Banks  and  Bunking,"  Dec.  Dig.  {Key 
yo.)  §  13.',;    Cent.  Dig.  §§  353-374. 

102  Union  Stock-Yards  Nat.  Bank  v.  Gillespie.  137  U.,  S.  411,  11 
Sup.  Ct.  118,  34  L.  Ed.  724;  Union  Stock-Yards  Nat.  Bank  v. 
Moore,  79  Fed.  705,  25  O.  C.  A.  150;  Armour-Cudahy  Packing  Co. 
V.  First  Nat.  Bank  of  Greenville,  09  Miss.  700,  11  South.  28;  James 
Reynolds  Elevator  Co.  v.  Merchants'  Nat.  Bank,  55  App.  Div.  1,  67  . 
N.  Y.  Supp.  397;  Interstate  Nat.  Bank  v.  Claxton,  97  Tex.  .")00,  80 
S.  W.  604,  65  L.  R.  A.  820,  104  Am.  St.  Rep.  885.  See  "Banks  and 
Banking:'  Dec.  Dig.   (Keg  No.)   §  13.',;    Cent.  Dig.  §§  3rj.',-37Ji. 

183  Smith  v.  Des  Moines  Nat.  Bank,  107  Iowa,  620,  78  N.  W. 
238  (cf.  Armstrong  v.  National  Bank,  53  Iowa,  752,  5  N.  W.  742) ; 
Kimmel  v.  Bean,  08  Kan.  598,  75  Pac.  1118,  64  L.  R.  A.  785,  104 
Am.  St.  Rep.  415;  Sparrow  v.  State'  Exch,  Bank,  103  Mo.  App. 
338,  77  S.  W.  169  (although  the  account  was  in  the  name  of  the 
depositor  "as  administrator") ;  Hutchinson  v.  President  and  Di- 
rectors of  Manhattan  Co.,  150  N.  Y.  250,  44  N.  E.  775;  Mej-ers 
V.  New  York  County  Nat.  Bank,  30  App.  Div.  482,  55  N.  Y.  Supp. 
504.  See,  also,  Willey  v.  Crockor-Woohvorth  Nat.  Bank,  141  Cal. 
508,  75  Pac.  106;  Boettcher  v.  Colorado  Nat.  Bank.  15  Colo.  16,  24 
Pac.  582 ;  McEwep  v.  Davis.  39  Ind.  109 ;  Allen  v.  Brown.  30  Iowa. 
3.30;  Wood  v.  Boylstou  Nat.  Bank.  129  Mass.  358,  37  Am.  Rop. 
360. 

Pl.iintlff   deposited   a   stock   certificate   with   a    firm,    who   unlaw- 


70  DEPOSITS  (Ch.  2 

that  the  bank  will  not  be  protected,  unless  it  has  been  misled 
by  the  apparent  ownership  and  has  thereby  been  prejudiced.^®* 

The  bank  may  apply  a  deposit  against  a  debt  of  the  equi- 
table owner,  although  the  deposit  stands  in  the  name  of  an- 
other person. ^^^ 

A  bank  may  not  apply  a  deposit  to  the  debt  of  a  firm  of 
which  the  depositor  is  a  member.^ ®^  Nor  can  it  charge  the 
individual  note  of  a  partner  to  the  account  of  the  hrm.^®^     It 

fully  used  it  as  collateral  security.  The  money  borrowed  thereon 
was  in  the  form  of  a  check,  which  the  firm  deposited  to  its  credit 
in  defendant  bank.  The  firm  was  also  indebted  to  defendant,  which 
was  authorized  to  apply  to  the  payment  of  the  indebtedness  any 
moneys  on  deposit  to  the  credit  of  the  firm.  Held  that,  as  against . 
plaintiff,  defendant  had  the  right  to  apply  the  moneys  collected 
on  the  check  to  the  firm's  indebtedness,  even  after  the  firm  had 
assigned.  Hatch  v.  Fourth  Nat.  Bank,  147  X.  Y.  184,  41  N.  E. 
403.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  134;  Cent. 
Dig.  §§  353-374. 

194  Burtnett  v.  First  Nat.  Bank  of  Corunna.  38  Mich.  G.30;  Dou;i- 
las  V.  First  Nat.  Bank  of  Hastings,  17  :Minn.  35  (Gil.  IS) ;  Cady 
V.  South  Omaha  Nat.  Bank,  46  Neb.  756,  65  N.  W.  906;  Id.,  49 
Neb.  125,  68  N.  W.  358;  Davis  v.  Panhandle  Nat.  Bank  (Tex.  Civ. 
App.)  29  S.  W.  926.  See  Shawnee  Nat.  Bank  v.  Wooten  &  Potts. 
24  Okl.  425.  103  Pac.  714.  Cf.  Forbes  v.  First  Nat.  Bank  of  Enid, 
21  Okl.  206,  95  Pac.  785.  See  "Banks  and  Banking,"  Dec.  Dig.  {Keji 
No.)  §  134;    Cent.  Dig.   §§  353-31 4- 

195  Camden  Nat.  Bank  v.  Green,  45  N.  J.  Eq.  546,  17  Atl.  689; 
Green  v.  Camden  Nat.  Bank,  46  N.  J.  Eq.  607,  22  Atl.  56.  Contra: 
Citizens'  Nat.  Bank  v.  Alexander,  120  Pa.  476,  14  Atl.  402.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  134;  Cent.  Dig.  §§ 
553-377/.- 

196  Watts  V.  Christie,  11*  Beav.  546;  International  Bank  v. 
Jones,  119  111.  407,  9  N.  E.  885;  Raymond  v.  Palmer,  41  La.  Ann. 
425,  6  South.  692,  17  Am.  St.  Rep.  398;  Adams  v.  First  Nat.  Bank, 
113  N.  C.  332,  18  S.  E.  513,  23  L.  R.  A.  Ill  (cf.  Hodgin  v.  People's 
Nat.  Bank,  125  N.  C.  503,  34  S.  E.  709) ;  Owsley  v.  Bank  of  Cumber- 
land (Ky.)  66  S.  W.  33;  Eyrich  v.  Capital  State  Bank,  67  Miss.  GO. 
6  South.  615.  See  "Banks  and  Baulking,"  Dec.  Dig.  (Key  No.)  § 
134;    Ciint.  Dig.  §§  353-374. 

197  Coote  V.  Bank  of  the  United  States,  Fed.  Cas.  No.  3,204,  3 
Cranch,  C.  Cv  95.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
8  J.l'i:    Cent.  Dig.  §§  353-37.'/. 


§§  19-21)      bank's  liex  or  kicht  of  set-off  71 

has  been  held  that  the  bank  may  apply  a  deposit  a^ihst  the 
joint  debt  of  the  depositor  and  anoth^r.^"* 

The  bank  may  not,  without  the  depositor's  consent,  apply 
a  deposit  against  a  note  on  which  the  depositor  is  an  indorser, 
or  a  surety,  or  against  a  debt  guaranteed  by  the  depositor.^"" 
But  it  may  so  apply  the  deposit  if  the  principal  debtor  is  in- 
solvent.'^^ 
Right  of  Surety  to  Have  Deposit  Applied 

A  bank  is  not  required,  without  a  demand  by  the  depositor, 
to  apply  a  deposit  on  account  of  his  debt.-°^  Whether  one 
who  holds  the  position  of  a  surety  of  a  debt  of  the  depositor 
to  the  bank,  as  the  indorser  of  a  note  held  by  it,  has  a  right 
to  have  the  deposit  applied  to  payment  of  the  debt,  and  con- 
sequently is  discharged  if  the  bank  fails  to  make  such  applica- 
tion when  it  holds  a  sufficient  deposit  to  pay  the  debt  and  per- 
mits the  deposit  to  be  checked  out,  is  a  question  as  to  which 
the  authorities  are  divided.  On  the  one  hand,  it  is  said  that 
the  right  of  the  bank  to  apply  a  deposit  to  the  satisfaction  of 
the  depositor's  debt  is  not  a  lien,  or  a  right  in  the  nature  of  a 
lien,  but  is  in  the  nature  of  a  set-off  or  application  of  pay- 
ments, neither  of  which,  in  the  absence  of  agreement  or  ex- 
press appropriation,  will  be  required  by  the  law  to  be  so  made 


198  Hayden  v.  Alton  Nat.  Bank,  29  111.  App.  458.  But  see.  Daw- 
son T.  Real-Estate  Bank,  5  Ark.  2S3.  Jlerchants'  &  Mechanics'  Bank 
of  Wheeling  v.  Evans,  9  W.  Va.  373.  See  "Banks  and  Bankini/," 
Dec.  Dig.  (Key  No.)  §  13',;   Cent.  Dig.  §§  353-37//. 

190  Harrison  v,  Harrison,  118  Ind.  179.  20  N.  E.  746,  4  L.  R. 
A.  Ill;  O'Grady  v.  Stotts  City  Bank,  lOG  Mo.  App.  Sm.  SO  S.  "W. 
G96.  See,  also.  New  Farmers'  Bank's  Trustee  v.  Young.  100  Ky. 
083,  39  S.  "W.  46.  See  "Banls  and  Banlclng;'  Dec.  Dig.  {Key  yo.) 
§  ISh'  Cent.  Dig.  §§  So3-37.',. 

2  00  Ex  parte  Howard  Nat.  Bank,  Fed.  Cas.  No.  6,764,  2  Lowell, 
487.  See  "Banks  and  Banking."  Dec.  Dig.  {Key  No.)  §  iS.};  Cent. 
Dig.  §§  353-37/,. 

201  Boothe  V.  Farmers'  &  Traders'  Nat.  Bank,  53  Or.  576.  98  Bac. 
509 ;  Guernsey  v.  Marks,  55  Or.  32:5.  106  Pac.  3.34  :  Bacon's  Adm'r 
V.  Bacon's  Trustees,  94  Va.  680.  27  S.  E.  576.  See  "Banks  and  BanTc- 
ingr  Dec.  Dig.  {Key  No.)  §  13.',;  Cent.  Dig.  §§  .3.1.1-37/,. 


72  DEPOSITS  (Ch.  2 

as  to  benefit  a  surety ;  and  it  is  therefore  held  that  the  surety 
is  not  discharged  by  the  bank's  failure  to  apply  the  deposit 
to  the  debt.^°^  On  the  other  hand,  it  is  said,  with  better  rea- 
son, that  the  right  of  the  bank,  if  not  strictly  a  lien,  neverthe- 
less gives  the  bank  the  power  to  retain  control  of  the  deposit 
for  the  purpose  of  security,  and  that  therefore,  if  the  bank 
fails  to  apply  the  deposit,  the  surety  is  discharged  by  operation 
of  the  rule  of  suretyship  that  a  creditor  who  parts  with  a  se- 
curity for  a  debt  thereby  discharges  the  surety.^*^^  The  bank 
is,  of  course,  under  no  duty  to  apply  the  deposit  in  favor  of 
one  primarily  liable,  as  the  acceptor  of  a  bill,-°*  or  the  maker 
of  a  note.^°^ 

20  2  National  Mahaiwe  Bank  v.  Peck.  127  Mass.  29S,  34  Am.  Rep. 
368.  See,  also,  Furber  v.  Dane,  203  Mass.  lOS.  89  N.  E.  227; 
London  &  S.  F.  Bank  v.  Parrott,  125  Cal.  472,  .58  Pac.  164,  73  Am. 
St.  Eep.  64;  Camp  v.  First  Nat.  Bank  of  Ocala,  44  Fla.  497,  33 
South.  241,  103  Am.  St.  Rep.  173;  Voss  v.  German- American  Bank 
of  Chicago,  83  111.  599,  25  Am.  Rep.  415;  Second  Nat.  Bank  of 
Lafayette  v.  Hill,  76  Ind.  223,  40  Am.  Rep.  239;  Ticonic  Bank  v. 
Johnson,  21  Me.  426;  National  Bank  of  Newburgh  v.  Smith,  66 
N.  T.  271,  23  Am.  Rep.  48;  Webb  v.  Smith,  30  Ch.  D.  192.  See 
"Banks  and  Banking,"  Dee.  Dig.  (Key  A'o.)  §  13-i;  Cent.  Dig.  §§ 
353-374. 

2  03  Pursifull  V.  Pinevllle  Banking  Co.,  97  Ky.  154,  30  S.  W.  203, 
53  Am.  St.  Rep.  409.  See,  also,  Bank  of  Taylorsville  v.  Hardesty 
(Ky.)  91  S.  W.  729 ;  Dawson  v.  Real-Estate  Bank,  5  Ark.  283 ;  Mc- 
Dowell V.  President,  etc.,  of  Bank  of  Wilmington  &  Brandywine,  1 
Har.  (Del.)  369;  Commercial  Nat.  Bank  v.  Henninger,  105  Pa. 
496. 

The  deposit  must  be  sufficient  at  the  time  of  maturity  of  the 
debt.  Subsequent  deposits  will  not  raise  the  duty.  People's  Bank 
of  Wilkes-Barre  v.  Legraud,  103  Pa.  3U9,  49  Am.  Rep.  126;  First 
Nat.  Bank  v.  Shreiner,  110  Pa.  188,  20  Atl.  718;  First  Nat.  Bank 
of  Lock  Haven  v.  Peltz,  176  Pa.  513,  35  Atl.  218,  36  L.  R.  A.  832, 
53  Am.  St.  Rep.  686.  See  "Banics  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  134;   Cent.  Dig.  §§  3-53-374. 

204Flournoy  v.  Fii-st  Nat.  Bank,  79  Ga.  810,  2  S.  E.  547;    Citi-. 

2  05  Mechanics'  &  Traders'  Bank  v.  Seitz,  150  Pa.  632,  24  Atl. 
356,  30  Am.  St.  Rep.  853 ;  Id.,  155  Pa.  191,  26  Atl.  209.  See  "Banks 
and  Banking."  Dec.   Dig.   (Keg  Xo.)   §  13',;    Cent.   Dig.   §§  3.53-37^. 


§  22)  SET-OFF    BY    DKl'OSITOR  73 


SET  OFF  BY  DEPOSITOR 

22.  A  depositor  has  the  right  to  set  off  a  general  deposit 
against  his  matured  debt  to  the  bank;  and  upon 
the  insolvency  of  the  bank  he  may  exercise  this 
right,  even  if  the  debt  is  not  matured. 

A  depositor  may  at  any  liinc  rcciuirc  the  bank  to  apply  a 
deposit  to  the  payment  of  his  debt ;  *'*"  and  in  an  action  by  the 
bank  on  his  note,  or  for  money  otherwise  due,  he  may  set  off 
his  deposit  against  tlic  demand.-"  This  right  of  sct-ofT  is 
usually  exercised  when  the  bank  is  insolvent,  and  the  depos- 
itor is  called  upon  to  pay  his  debt  to  it,  and  in  such  case  he  is 
entitled  by  way  of  set-off  to  the  full  amount  of  his  deposit, 
and  is  not  compelled  to  pay  his  debt,  less  such  dividend  as  may 
be  payable  to  the  other  general  creditors.  The  right  may 
therefore  be  exercised  as  against  a  receiver  or  other  repre- 
sentative of  the  insolvent  or  bankrupt  bank.^"^  Such  allow- 
ance   is   not    a    preference    forbidden    by    the    national    bank 

zeiis'  P.Miik  of  Steiibenville  v.  C'Jirson,  ?,2  Mo.  101.  Of.  ArnistrQiiK  v. 
Warner.  4U  Ohio  St.  37G,  31  N.  E.  877,  17  L.  II.  A.  4(;(;;  Viui  Winkle 
Gin  &  Mafhlnery  Co.  v.  Citizens'  Bank  of  P.nffalo,  .S!>  Tc.x.  147. 
a3  ."^.  W.  8fi2.  Sec  "lianhn  anti  Jianhivff,"  Dec.  IH{/.  (Krii  \n.)  § 
13 J,;    Cent.  Dig.  §§  353-31  h 

200  l^uhach  v.  Lelljert.  87  Pa.  T>u.  See  "Banlcs  and  lUmkinn." 
Dec.  DUj.  {Key  No.)  §  135;    Cent.  DUi.  g§  375-3TJ. 

207  Equltalile  P.auk  v.  Claassen,  3  Misc.  Ilep.  148,  23  N.  Y.  Supi). 
310.  See,  al.so,  Becker  v.  Seymour,  71  Minn.  3!)4,  73  N.  W.  lODO.  See 
"Banks  and  liankintJ,"  Dec.  DUi.  {Key  No.)  §  135;  Cent.  DUj.  §§ 
375-370. 

208  Fisher  v.  Hanover  Niil.  I'.ank.  (J4  Fed.  8.'!2,  12  0.  C.  A.  4.'!(); 
State  V.  Brohston,  1)4  (hi.  05.  21  S.  E.  14(!.  47  Am.  St.  Uep.  l.'JS; 
Bernstein  v.  Col)urn,  40  Neb.  734,  08  N.  W.  1021 ;  Second  Nat.  Bank 
of  Cincinnati  v.  Ilemint'ray,  34  Oliio  St.  381  ;  Miller  v.  Receiver  of 
Franklin  P.ank,  1  Paige  (N.  Y.)  444;  Sklles  v.  Houston,  110  Pa. 
2o4,  2  All.  .30  (administrator  of  Insolvent  Iianker) ;  post.  p.  423.  Bee 
"JianlcM  rind  fianlcinu,"  iKc.  I)\<i.  (Keif  So.)  §  135;  'Cent.  Dif/.  $9 
375-370. 


74  DEPOSITS  (Ch.  2 

acts.^**^  If  the  bank  is  insolvent,  the  depositor  may  exercise 
his  right  even  against  a  debt  that  did  not  mature  until  after 
the  insolvency.^^°  He  may  exercise  it  as  against  a  debt  on 
which  he  is  a  surety,  as  a  note  on  which  he  is  an  indorser.^^^ 
A  deposit  is  not  available  as  a  set-off,  however,  if  it  has  been 
assigned  to  a  debtor  for  that  purpose  after  the  bank's  in- 
solvency.^ ^^ 

209  Scott  V.  Armstrong.  146  U.  S.  409.  13  Sup.  Ct.  148,  36  L.  Ed. 
1059;  Mercer  r.  Dyer.  1.5  Mont.  317,  39  Pae.  314.  See  "Banlis  and 
Banking,"  Dec.  Dig.  (Key.  No.)  §§  135,  287;  Cent.  Dig.  §§  375- 
379,  1122. 

210  Scott  V.  Armstrong.  146  U.  S.  499,  13  Sup.  Ct.  148,  36  L.  Ed. 
1059 ;  Steelman  v.  Atchley  (Ark.)  135  S.  W.  902,  32  L.  R.  A.  (N.  S.) 
1060 ;  Yardley  v.  Clothier  (C.  C.)  49  Fed.  337 ;  :\IcCagg  v.  Woodman, 
28  111.  84 ;  Colton  v.  Drovers'  Perpetual  Building  &  Loan  Ass'n, 
90  Md.  85.  45  Atl.  23,  46  L.  R.  A.  388,  78  Am.  St.  Rep.  431 ;  Thomp- 
son V.  Union  Trust  Co.,  130  Mich.  508,  90  N.  W.  294,  97  Am.  St. 
Rep.  494;  Clute  v.  Warner,  8  App.  Div.  40,  40  N.  Y.  Supp.  392; 
Jack  V.  Klepser,  196  Pa.  187,  46  Atl.  479,  79  Am.  St.  Rep.  699; 
Jones  V.  Piening,  85  Wis.  264,  55  N.  W.  413. 

The  right  of  a  depositor  to  set  off,  without  demand,  a  deposit  on 
open  account,  or  one  the  certificate  of  which  has  not  matured, 
arises,  in  the  absence  of  fraud,  only  in  case  of  the  declared  insol- 
vency of  the  bank.  Stadler  v.  First  Nat.  Bank,  22  Mont.  190,  56 
Pae.  Ill,  74  Am.  St.  Rep.  582.  See  ''Banls  and  Banlcing,"  Dec.  Dig. 
(Key.  A'o.)  §  135;    Cent.  Dig.  §§  375-379. 

211  Yardley  v.  Clothier  (C.  C.)  49  Fed.  337;  Kilby  v.  First  Nat. 
Bank,  32  Misc.  Rep.  370,  66  N.  Y.  Supp.  579;  Davis  v.  Industrial 
Mfg.  Co.,  114  N.  C.  321,  19  S.  E.  371,  23  L.  R.  A.  322;  Arnold  v. 
Niess,  1  Walk.  (Pa.)  115.  But  not  if  the  maker  is  solvent.  New 
Farmers'  Bank's  Trustee  v.  Young,  100  Ky.  683,  39  S.  W.  4G; 
Borough  Bank  of  Brooklyn  v.  Mulqueen,  70  Misc.  Rep.  137,  125  N. 
Y.  Supp.  1034.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  135; 
Cent.  Dig.  §§  375-379. 

212  In  re  Shults  (D.  C.)  132  Fed.  573;  Ingwersen  v.  Buchholz,  88 
111.  App.  73 ;  Stone  v.  Dodge,  96  Mich.  514,  56  N.  W.  75,  21  L.  R.  A. 
280  (under  statute).  See  Oyster  v.  Short,  177  Pa.  589,  35  Atl.  686. 
Cf.  Johnston,  v.  Humphrey,  91  Wis.  76,  64  N.  W.  3lf,  51  Am.  St. 
Rep.  873.  See  "Batiks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  135; 
Cent.  Dig.  §§  375-379;   "Bankruptcy;'  Dec.  Dig.  (Key  No.)  §§  154,  i59. 


§§  23-24)  CEUTIFICATE    OF    DEPOSIT  75 


CERTIFICATE  OF  DEPOSIT 

23.  DEFINITION  AND  EFFECT— A  certificate  of  depos- 

it is  a  writing  issued  by  a  bank  or  banker,  acknowl- 
edging the  deposit  of  money  and  promising  to  pay 
the  amount  thereof  to  the  depositor,  or  to  him  or 
order,  or  to  bearer,  as  the  case  may  be.  Such  a 
writing  is  in  effect  a  promissory  note,  and,  if  pay- 
able to  order  or  bearer,  is  a  negotiable  instrument. 
The  certificate  may  be  made  payable  at  a  future 
day  certain,  and  if  no  time  of  payment  be  ex- 
pressed is  payable  upon  demand. 

24.  NECESSITY  OF   DEMAND— By  the  weight  of  au- 

thority a  certificate  of  deposit  must  be  presented 
for  payment  in  order  to  charge  the  bank,  and  until 
presentment  the  statute  of  limitations  does  not  be- 
gin to  run;  but  in  some  states  (now  including 
those  which  have  enacted  the  Negotiable  Instru- 
ments Law)  the  rule  prevails  that  such  present- 
ment is  not  necessary,  and  the  statute  begins  to 
run  upon  the  issue  of  the  certificate. 

In  General 

Ordinarily  a  depositor  receives  from  the  bank  no  evidence 
of  his  deposit,  except  the  entry  of  the  amount  in  his  pass 
book.*^^  In  such  case  the  bank  undertakes  to  honor  his 
checks  or  other  orders  to  the  extent  of  the  deposit.-^*  Some- 
times, however,  when  a  checking  account  as  to  a  deposit  is 
not  contemplated,  the  bank  issues  a  certificate  of  deposit.  A 
deposit  so  made  has  the  character  of  a  general  deposit,  in  so 
far  as  it  creates  simply  the  relation  of  debtor  and  creditor  be- 
tween the  bank  and  the  depositor.-i"^ 

218  Ante,  p.'25.  214  Ante,  p.  14. 

21B  Woodhouse  v.  Crandall.  99  111.  App.  Ho-,  affirmed  197  111.  104. 
64  N.   E.  292.  58  L.   R.  A.  3S5 ;    Leaphart  v.    Commercial  Bank  of 


76  '  DEPOSITS  (Ch.  2 

A  writing  which  merely  acknowledges  the  deposit  of  money 
does  not  properly  fall  within  the  meaning  of  a  certificate  of 
deposit,  but  is  a  mere  receipt,  furnishing  evidence  between  the 
bank  and  the  depositor.^^^  To  be  a  certificate  of  deposit,  the 
writing  must  contain  also  the  bank's  promise  to  pay  the 
amount  deposited.  Such  a  certificate  is  in  effect  a  promissory 
note,-^^  and,  if  it  be  payable  to  order  or  to  bearer,  it  is  a 
negotiable  instrument.^  ^^     Certificates  of  deposit  do  not  or- 

Columbia,  45  S.  C.  563,  23  S.  E.  939,  83  L.  R.  A.  700,  55  Am.  St. 
Rep.  800.  See  "BanJcs  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  119, 
152;    Cent.  Dig.  §§  2S9-292,  465-482. 

216  Modern  Woodmen  of  America  v.  Union  Nat.  Bank,  108  Fed. 
753,  47  C.  C.  A.  667  (Sanborn,  J.,  dissenting);  First  Nat.  Bank  of 
Union  Mills  v.  Clark,  134  N.  Y.  368.  32  N.  E.  38,  17  L.  R.  A.  580. 
See,  also,  Young  v.  American  Bank,  44  Misc.  Rep.  305,  89  N,  Y. 
Supp.  913.  Contra:  Long  v.  Straus,  107  Ind.  94,  6  N.  E.  123,  7 
N.  E.  763,  57  Am.  Rep.  87.  See  "Banks  and  Banking."  Dec.  Dig. 
{Key  No.)  §  152;   Cent.  Dig.  §§  336,  4G5-J,82. 

217  In  re  Brown's  Estate,  113  Iowa,  351,  85  N.   W.   617. 

Where  a  certificate  was  payable  to  tbe  order  of  a  minor  or  guard- 
ian, payment  to  one  supposed  to  be,  but  not,  such  guardian  was  not 
a  discharge.  McMahon  v.  German-American  Nat.  Bank  of  Little 
Falls,  111  Minn.  3lS;  127  N.  W.  7,  29  L.  R.  A.  (N.  S.)  07.  See 
''Banks  and  Bankings,"  Dec.  Dig.  {Key  No.)  §  152;  Cent.  Dig.  §§ 
465-482;  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  //2;  Cent.  Dig. 
§  62.  ,  • 

218  First  Nat.  Bank  of  Mishawaka  v.  Stapf,  165  Ind.  102,  74  N. 
E.  987,  112  Am.  St.  Rep.  214 ;  Fells  Point  Sav.  Inst,  of  Baltimore  v. 
Weedon,  18  Md.  320,  81  Am.  Dec.  603 ;    Cassidy  v.  First  Nat.  Bank, 

,  go  Minn.  86,  14  N.  W.  363 ;  Dickey  v.  Adler,  143  Mo.  App.  326,  127 
S.  W.  593 ;  Citizens'  Nat.  Bank  v.  Brown,  45  Ohio  St.  39,  11  N.  E. 
799,  4  Am. '  St.  Rep.  526 ;  Read  v.  Marine  Bank  of  Buffalo,  136  N. 
Y.  454,  32  N.  E.  1083,  32  Am.  St.  Rep.  758;  In  re  Baldwin's  Estate. 
170  N.  Y.  156,  63  N.  E,  62,  58  L.  R.  A.  122;  Hanna  v.  Manufacturers' 
Trust  Co.,  104  App.  Div.  90,  93  N.  Y.  Supp.  304 ;  Miller  v.  Austen, 
13  How.  218,  14  L.  Ed.  119;  Forrest  v.  Safety  Banking  &  Trust  Co. 
(C.  C.)  174  Fed.  345  (under  Negotiable  Instruments  Law).  Cf.  Dol- 
lar V.  International  Banking  Corp.,  10  Cal.  App.  83,  101  Pac.  34, 
affirmed  13  Cal.  App.  331,  109  Pac.  499. 
A  certificate  issued  by  a  trust  company,  payable  to  the  person  named 


§g  23-24)  CERTIFICATE    OF    DEFOSIT  77 

dinarily  contain  the  word  "promise" ;  but  the  promise  to  pay 
is  sufficiently  expressed  by  the  word  "payable."  Negotiable 
certificates  of  deposit  are  commonly  in  substantially  the  fol- 
lowing form:  "This  certifies  that  A.  B.  has  deposited  in  this 
bank  $1,000,  payable  to  himself,  or  order,  on  the  return  of 
this  certificate  properly  indorsed."  The  words  "on  the  return 
of  this  certificate  properly  indorsed"  create  no  such  contin- 
gency as  to  payment  as  aflfects  the  negotiability  of  the  instru- 
ment, since  they  simply  express,  it  has  been  said,  what  the 
law  implies  as  to  the  duty  of  the  holder  of  a  promissory  note 
in  common  form,  in  the  absence  of  any  such  stipulation,^" 
except  so  far  as  by  implication  they  call  for  presentment  at  a 
particular  place ;  that  is,  at  the  bank.  It  follows  that  the  in- 
dorser  of  a  negotiable  certificate  incurs  the  usual  liability  of 
an  indorser,"*^  and  that  an,  innocent  purchaser  takes  it  free 
from  equities  or  personal  defenses,  such  as  payment  by  the 
bank  to  the  original  holder,  to  the  same  extent  as  such  pur- 
chasers of  other  negotiable  instruments.^-^ 

or  his  assigns,  on  return  of  the  certificate,  which  is  assignable  only 
on  the  books  of  the  company,  is  not  a  negotiable  iustnuiient.  Zan- 
der V.  New  York  Security  &  Trust  Co.,  178  N.  Y.  208,  70  N.  E.  449, 
102  Am.  St.  Rep.  492.  See,  also,  In  re  Fearing,  138  App.  Div.  SSI, 
123  N.  Y.  Supp.  396.  See  "Bills  and  yotcs,"  Dec.  Dig.  (Key  Xo.) 
§§  42,  1J,7,  151;   Cent.  Dig.  §§  62,  363,  3S0. 

219  Hatch  V.  First  Nat.  Bank,  94  Me.  348,  47  Atl.  90S,  SO  Am.  St. 
Rep.  401 ;  Giissidy  v.  First  Nat.  Bank,  30  Minn.  SO,  14  N.  W.  303 ; 
Kirkwood  v.  First  Nat.  Bank  of  Hastings,  40  Neb.  484,  58  N.  W. 
1016,  24  L.  R.  A.  444,  42  Am.  St.  Rep.  683.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  152;  Cent.  Dig.  §§  ■',65-.',S2;  "Biils  and 
Xptes,"  Dec.  Dig.  (Key  No.)  §'§  Ul,  151;   Cent.  Dig.  §§  3S0,  390. 

220  Gate  V.  Patterson,  25  Mich.  191;  Beckwith  v.  Webber,  7S 
Mich.  390,  44  N.  W.  330.  See  "Banks  and  Banking,''  Dec.  Dig.  {Key 
No.    §  152;    Cent.  Dig.  §§  J,65-.',82. 

221  Kavanagh  v.  Bank  of  America,  239  111.  404,  &S  N.  E.  171 ;  Kirk- 
wood V.  First  Nat.  Bank  of  Hastings,  40  Neb.  4S4,  58  N.  W.  1016, 
24  L.  R.  A.  444,  42  Am.  St.  Rep,  083.  See,  also,  Armstrong  v.  Amer- 
ican Exch.  Nat.  Bank,  133  U.  S.  433,  19  Sup.  Ct.  450.  33  L.  Ed.  747 ; 
In  re  Ellard,  02  Misc.  Rep.  374,  114  N.  Y.  Supp.  S27 ;  Currey  v. 
Joplin  Savings  Bank,  100  Mo.  App.  532,  74  S.  W.  lOHC ;    McOorray 


78  DEPOSITS  (Ch.  2 

Whether  a  certificate  which  is  payable  "in  current  funds" 
is  negotiable  depends,  as  in  the  case  of  other  instruments, 
upon  whether  these  words  are  to  be  construed  as  signifying 
money — that  is,  legal  tender — or  as  including  other  current 
means  of  payment.  It  is  forcibly  argued  that  unless  these 
words  have  the  broader  meaning  they  add  nothing,  and  that 
unless  they  be  disregarded  they  must  be  construed  as  includ- 
ing other  means  of  payment,  and  upon  this  construction  some 
courts  hold  certificates  payable  in  "current  funds,"  or  in  "cur- 
rency," as  not  negotiable;  ^^^  but  by  the  prevailing  rule  the 
words  are  construed  to  signify  money,  and  the  negotiability 
of  the  certificates  is  sustained. ^-^ 

Pozver  of  Bank  to  Issue 

The  issue  of  certificates  of  deposit  is  an  ordinary  incident 
of  the  business  of  banking,  and  is  within  the  power  of  the 
bank  or  banker,  unless  there  be  some  statute  forbidding  it.^'* 


v.-  Stockton  Savings  &  Loan  Soc,  131  Cal.  321,  63  Pac.  479.  Contra : 
Lebanon  Bank  v.  Mangan,  28  Pa.  452.  Cf.  Shute  v.  Pacific  Nat. 
Bank,  136  Mass.  487. 

A  bank  is  liable  on  an  accommodation  certificate  to  a  purchaser 
thereof  for  value,  though  he  knew  it  was  accommodation  paper. 
Holland  Trust  Co.  v.  Waddell,  75  Hun,  104,  26  N.  Y.  Supp.  980.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  152;  Cent.  Dig.  §§ 
46.5--',82. 

2  22  National  State  Bank  of  Lafayette  v.  Ringel,  51  Ind.  393.  See 
Norton,  Bills  and  Notes  (3d  Ed.)  p.  105.  See  "Bills  and  Notes,"  Dec. 
Dig.  (Key  No.)  §§  1-^7,  151;   Cent.  Dig.  §§  3S0,  390. 

2  23  Hatch  V.  First  Nat.  Bank,  94  Me.  348,  47  Atl.  908,  80  Am.  St. 
Rep.  401;  Kirkwood  v.  First  Nat.  Bank  of  Hastings,  40  Neb.  484, 
58  N.  W.  1016,  24  L.  R.  A.  444,  42  Am.  St.  Rep.  683 ;  Citizens'  Nat. 
Bank  v.  Brown,  45  Ohio  St.  39,  11  N.  E.  799,  4  Am.  St.  Rep.  526; 
Klauber  v.  Biggerstaff,  47  Wis.  551,  3  N.  W.  357,  32  Am.  Rep.  773 
(currency).  See,  also,  Bull  v.  First  Nat.  Bank,  123  U.  S.  105,  8  Sup. 
Ct.  62,31  L.  Ed.  97.  See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §§ 
m,  151,  162;    Cent.  Dig.  §§  3S0,  390-S98. 

224  Abbott  V.  Jack,  136  Cal.  510,  69  Pac.  257;  Bank  of  Peru  v. 
Farnsworth,  18  111.  563.  See  "Banks  and  Banking,"  Dec.  Dig.  (Kcf 
No.)  §  152;    Cent.  Dig.  §§  465-482. 


§§  23-24)  CERTIFICATE    OF    DEPOSIT  79 

Their  issue  is  therefore  within  the  power  of  a  bankift^^orpo- 
ration  authorized  to  receive  deposits  and  to  exercise  the  usual 
powers  incidental  to  the  business. ^^'^  Banking  corporations 
are  sometimes  forbidden  to  put  in  circulation  notes  not  payable 
on  demand  and  without  interest,  and  a  time  certificate  of  de- 
posit has  been  held  within  this  prohibition. ^-^  But  under  Rev. 
St.  U.  S.  §  5183  (U.  S.  Comp.  St.  1901,  p.  3482),  providing 
that  no  national  banking  association  shall  issue  post  notes  or 
any  other  notes  to  circulate  as  money  than  such  as  are  au- 
thorized by  the  act — that  is,  other  than  bank  notes — the  issue 
of  certificates  of  deposits  in  ordinary  form  is  not  forbidden. ^^^ 

Necessity  for  Demand 

Certificates  of  deposit  are  sometimes  by  their  terms  made 
payable  at  a  future  day ;  but  often  the  time  of  payment  is  not 
expressed,  except  by  the  words  making  them  payable  on  the 
return  of  the  certificate.  If  a  certificate  is  payable  at  a  future 
day  certain,  it  must  be  presented  for  payment  on  the  day  of 
the  maturity  in  order  to  charge  an  indorser,^^^  and  it  is  over- 
due after  that  date,  so  far  as  concerns  the  rights  of  subsequent 
purchasers,  who  will  take  it  subject  to  defenses.-"" 

Ordinarily  presentment  is  not  necessary  to  charge  a  per- 

223  Francois  v.  Lewis,  68  Minn.  409,  71  N.  W.  621;  Bank  of  Sag- 
inaw V.  Title  &  Trust  Co.  of  Western  Pennsylvania  (C.  C.)  105  Fed. 
491.  See  "Banks  and  Banking,'"  Dec.  Dig.  {Key  No.)  §  152;  Cent. 
Dig.  §§  40o-J,S2. 

226  Bank  of  Orleans  v.  Merrill,  2  Hill  (N.  Y.)  295;  Leavitt  v. 
Palmer,  3  N.  Y.  19,  51  Am.  Dec.  333.  See  "Batiks  and  Banking" 
Dec.  Dig.  {Key  No.)  §  152;   Cent.  Dig.  §§  J,G5-JiS2. 

227  Kiddle  V.  First  Nat.  Bank  (C.  C.)  27  Fed.  503;  Hunt,  Appel- 
lant, 141  Mass.  515.  6  N.  E.  554;  Logan  Nat.  Bank  of  West  Liberty, 
Ohio,  V.  Williamson,  2  Ohio  Cir.  Ct.  R.  IIS.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  152;   Cent.  Dig.  §§  4G5--',S2. 

228Towle  V.  Starz,  67  Minn.  370,  09  N.  W.  1098,  36  L.  R.  A.  403. 
See  "Banks  and  Banking,"-  Dec.  Dig.  {Key  No.)  §  152;  Cent.  Dig. 
§§  J,65-.',S2. 

228  First  Nat.  Bank  of  Rapid  City  v.  Security  Nat.  Bank  of 
Sioux  City,  34  Neb.  71,  51  N.  W.  305,  15  L.  R.  A.  386,  33  Am.  St.  Rep. 
618;    Kirkwood  v.  First  Nat.  Bank  of  Hastings,  40  Neb.  484,  58  N. 


80  DEPOSITS  (Ch.  2 

son  primarily  liable  upon  a  negotiable  instrument.  Even  if  a 
promissory  note  be  payable  on  demand,  an  action  accrues 
against  the  maker,  and  the  statute  of  limitations  begins  to 
run  from  the  moment  of  issue.  For  the  reason  that  a  certifi- 
cate of  deposit  is  a  promissory  note,  some  courts  hold  that  up- 
on a  demand  certificate  an  action  accrues  upon  its  issue,  and 
the  statute  of  limitations  then  begins  to  run.^^°  Whatever 
justification  there  may  be  for  the  doctrine  that  demand  is  un- 
necessary upon  an  ordinary  demand  note,  different  considera- 
tions apply  to  a  certificate  of  deposit.  It  is  universally  con- 
ceded that,  upon  a  deposit  where  no  certificate  is  issued,  the 
contract  of  a  bank,  based  on  business  custom,  is  to  pay  upon 
demand,  and  action  does  not  lie  until  demand  has  been 
made.^^^  The  holder  of  a  certificate  is  a  depositor,  and,  like 
any  other  depositor,  may  leave  the  money  in  bank  for  an  in- 
definite period.  Moreover,  by  the  certificate  as  it  is  usually 
worded  the  bank  promises  to  pay  upon  its  return ;  that  is,  up- 
on its  presentment  at  the  bank.^^^  Accordingly,  by  the  weight 
of  authority  it  is  properly  held  that  upon  a  certificate  of  de- 
posit in  ordinary  form  presentment  must  be  made  to  charge 
the  bank,^^^  and  until  presentment  has  been  made  the  statute 

W.  1016,  24  L.  R.  A.  444,  42  Am.  St.  Rep.  683.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  152;^  Cent.  Dig.  §§  465-482. 

2  30  Brummagim  v.  Tallant,  29  Ca'l.  503,  89  Am.  Dec.  61;  Mer- 
eness  v.  First  Nat.  Bank  of  Charles  City,  112  Iowa,  11,  S3  N.  W. 
711,,  51  L.  R,  A.  410,  84  Am.  St.  Rep.  318 ;  Tripp  v.  Curtenius,  30 
Mich.  494,  24  Am.  Rep.  610 ;  Birch  v.  FisheP,  51  Mich.  39,  16  N.  W. 
220 ;  Beardsley  v.  Webber.  104  Mich.  88,  62  N.  W.  173 :  Mitchell  v. 
Easton,  37  Minn.  335,  33  N.  W.  910 ;  Curran  v.  Witter,  68  Wis.  16. 
31  N.  W.  705,  60  Am.  Rep.  827.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  152;  Cent.  Dig.  §§  465-4S2. 

2  31  Post,   p.  90. 

232  Sanbourn  v.  Smith,  44  Iowa,  152;  Elliott  v.  Capital  City  State 
Bank,  128  Iowa,  275,  103  N.  W.  777,  1  L.  R.  A.  (N.  S.)  1130,  111  Am. 
St.  Rep.  198.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  152; 
Cent.  Dig.  §§  465-482. 

283Auten  V.  Crahan,  81  111.  App.  .502;  Elliott  v.  Capital  City  State 
Bank.  128  Iowa,  275.  103  N.  W.  777,  1  L.  R.  A.  (N.  S.)  1130.  Ill 
Am.  St.  Rep.  198 ;    Brown  v.  McElroy.  .52  Ind.  404 ;    Cottle  v.  Marine 


§15  23-24)  CERTIFICATE    OF    DEPOSIT  81 

of  limitation  does  not  begin  to  run.^^*  In  states  \vii€re  the 
courts  have  so  held  and  where  the  Negotiable  Instruments 
Law  has  been  enacted,  these  rules  have  been  changed  for  the 
worse  by  the  provision  that  "presentment  for  payment  is  not 
necessary  in  order  to  charge  the  person  primarily  liable  on  the 
instrument,"  without  excepting  certificates  of  deposit.^^'^ 

If  a  certificate  of  deposit  is  payable  upon  a  day  certain,  it 
is  overdue,  as  has  been  said,  so  far  as  concerns  the  rights  of 
subsequent  purchasers,  after  that  day.^^^  When  a  demand 
certificate  is  to  be  considered  overdue  in  this  sense  depends 
upon  the  rule  as  to  the  necessity  of  demand  in  the  particular 
jurisdiction.  If  the  certificate  be  regarded  as  a  mere  demand 
note,  it  becomes  overdue  after  the  lapse  of  a  reasonable  time 
after  its  date,  although  no  demand  is  made.^^"     Where  the 

Bank  of  Bufifalo,  166  N.  Y.  53,  59  X.  E.  736;  Young  v.  American 
Bank.  44  Misc.  Rep.  308.  89  N.  Y.  Supp.  915;  Tobin  v.  McKinney, 
14  S.  D.  52.  84  N.  W.  228.  91  Am.  St.  Rep.  688;  Id..  15  S.  D.  2.j7. 
88  N.  W.  572,  91  Am.  St.  Rep.  694 ;  Bellows  Falls  Bank  v.  Rutland 
County  Bank,  40  Vt.  377.  Sec  "Banks  and  Banlcing,"  Dec.  Dig.  (Key 
yo.)  §  152;   Cent.  Dig.  §§  465-J,S2. 

23 »  Riddle  v.  First  Nat.  Bank  (C.  O.)  27  Fed.  503;  Hillsipger  v. 
Georgia  Railroad  Bank,  108  Ga.  357,  33  S.  E.  985,  75  Am.  St.  Rep.  42; 
Fells  Point  Sav.  Inst,  of  Baltimore  v.  Weedon,  18  Md.  320,  81  Am. 
Dec.  603 ;  Shute  v.  Pacific  Nat.  Bank.  136  Mass.  487 ;  Sharp  v.  Cit- 
izens' Bank  of  Stanton,  70  Neb.  758,  98  N.  W.  50;  Bank  of  Com- 
merce V.  Harrison,  11  N.  M.  50,  66  Pac.  460;  Howell  v.  Adams.  68 
N.  Y.  314 ;  Smiley  v.  Fry,  100  N.  Y.  262,  3  N.  E.  186 ;  In  re  Gard- 
ner's Estate,  228  Pa.  282,  77  Atl.  509,  29  L.  R.  A.  (N.  S.)  685; 
Tobin  v.  McKinney,  14  S.  D.  52,  84  N.  W.  228,  91  Am.  St,  Rep.  688 ; 
Id.,  15  S.  D.  257,  88  N.  W.  572,  91  Am.  St.  Rep.  694.  Cf.  Baker  v. 
Leland,  9  App.  Div.  365,  41  N.  Y.  Supp.  399.  See  "BanJcs  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  152;   Cent.  Dig.  §§  ^65-482. 

-35  Negotiable  Instruments  Law,  §  70.  See  criticism  of  the  late 
Dean  James  Ban-  Ames,  in  Branuan,  Neg.  Inst.  Law,  pp.  53,  78,  SO; 
and  Id.  pp.  59.  68,  81,  89,  01,  151,  152. 

28e  Ante,  p.  79. 

237  Tripp  V.  Curtenius,  36  Mich.  494,  24  Am.  Rep.  610.  See  Nego- 
tiable Instruments  Law,  §  71 ;  post,  p.  134. 

A  demand  certificate  falls  within  a  statute  requiring  promissory 
TiFF.BKS.iS:  B.— 6 


82  DEPOSITS  (Ch.  2 

rule  prevails  that  presentment  is  necessary  to  charge  the  bank, 
however,  it  follows  that  a  certificate  is  overdue  only  after  de- 
mand.^^* 

OVERDRAFTS 

25.  Where  a  bank  permits  a  customer  to  draw  from  it  more 
money  than  is  standing  to  his  credit  in  his  deposit 
account,  the  transaction  is  in  effect  a  loan  by  the 
bank  to  the  customer,  and  the  bank  may  recover 
him  the  amount  of  the  overdraft. 

,  An  overdraft  arises  when  a  customer  of  a  bank  draws  from 
it  more  money  than  is  standing  to  his  credit  in  his  account. ^^'^ 
Of  course,  a  bank  is  under  no  obligation  to  a  customer,  in  the 
absence  of  special  agreement,  to  honor  a  check  which  will 
overdraw  his  account.^*"  If  it  does  so,  the  transaction  is  in 
effect  a  loan.^*^  An  agent  merely  authorized  to  draw  upon 
his  principal's  account  is  not  thereby  authorized  to  make  over- 
drafts, and  consequently  the  principal  is  not  liable  therefor 
unless  he  ratifies  the  agent's  act,  or  is  by  reason  of  special  cir- 

notes  payable  on  demand  to  be  presented  witbin  60  days  as  a  condi- 
tion of  charging  an  indorser.  Mitchell  v.  Easton,  37  Minn.  335,  33 
N.  W.  910.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  152; 
Cent.  Dig.  §§  ^65-482;  "Bills  and  Notes,"  Cent.  Dig.  §§  62,  S76%. 

2  38  National  Bank  of  Ft.  Edward  v.  Washington  County  Nat.  Bank, 
5  Hun  (N.  Y.)  605.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
150;  Cent.  Dig.  §§  465-^82. 

239  Low  V.  Taylor,  41  Mo.  App.  517  (under  agreement  by  which 
a  third  person  was  to  be  liable  for  overdrafts) ;  Marine  Bank  of 
Buffalo  V.  Butler  Colliery  Co.,  52  Hun,  612,  5  N.  Y.  Supp.  291 ;  State 
V.  Jackson,  21  S.  D.  494,  113  N.  W.  880.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  150;  Cent.  Dig.  §§  455-7,64%. 

2  40  American  Exch.  Nat.  Bank  v.  Gregg,  1.38  111.  596,  28  N.  E.  839, 
32  Am.  St.  'Rep.  171 ;  Harrington  v.  First  Nat.  Bank  of  Marseilles, 
85  111.  App.  212.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
150;  Cent.  Dig.  §§  /,55-J,6J,y2. 

241  Hennessy  Bros.  &  Evans  Co.  v.  Memphis  Nat.  Bank,  129  Fed. 
557,  64  C.  C.  A.  125.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  150;  Cent.  Dig.  §§  455-46// Vo. 


§  25)  OVERDRAFTS  83 

cnmstances  estopped  to  deny  his  authority;  '"  but  iftlie  prin- 
cipal  allows  his   agent  habitually   to  overdraw  his   account, ' 
honoring  the  overdrafts,  the  bank  may  assume  that  such  acts 
are  authorized.-'*^ 

A  bank  may  maintain  an  action  to  recover  the  amount  of 
an  overdraft  from  the  drawer.-^*  In  the  absence  of  agree- 
ment,-*^ the  bank  may  not  recover  interest  upon  an  over- 
draft; -*"  but  after  demand  for  payment  interest  runs  by  way 

242  Morobants'  Nat.  Bank  of  Peoria  v.  Nichols  &  Shepard  Co.,  223 
111.  41,  79  N.  E.  38,  7  L.  R.  A.  (N.  S.)  752.  See  City  of  Pittsburg  v. 
First  Nat.  P.ank  of  Sberaden,  230  Pa.  17G,  79  Atl.  40G. 

But  whore  a  depositor  notified  the  bank  not  to  allow  the  account 
to  be  overdrawn  beyond  a  certain  amount,  and  cheeks  exceeding  the 
limit,  drawn  by  one  authorized,  were  paid,  it  was  held  that  the  de- 
positor could  not  by  mere  notice  defeat  the  rights  of  the  holders,  nor 
the  right  of  the  bank  to  pay  and  charge  to  the  account — the  decision 
resting  apparently  on  the  right  of  a  checkholder  in  Iowa  to  sue  the 
bank.  Bremer  County  Bank  v.  Mores,  73  Iowa,  289,  34  N.  W.  863; 
post,  p.  129.  See  ''Corporations,"  Dec.  Dig.  (Key  No.)  §§  ^2-5,  46S; 
Cent.  Dig.  §§  1820-1831;  "Principnl  and  Agent,"  Dec.  Dig.  (Key  ]\^o.) 
§  109;  Cent.  Dig.  §§  318-322,  360-365. 

24  3  Merchants'  &  Planters'  Nat.  Bank  of  Union  v.  Clifton  Mfg.  Co., 
56  S.  C.  320,  33  S.  E.  750.  See  "Corporations,"  Dec.  Dig.  (Key  iVo.) 
§  .}25;  Cent.  Dig.  §§  1697-1705. 

244  McLean  County  Bank  v.  Mitchell,  88  111.  52;  Thomas  v.  Inter- 
national Bank,  46  111.  App.  461;  Franklin  Bank  v.  Byram,  39  Me.  489, 
63  Am.  Dec.  643.  See,  also,  Burwell  v.  Burgwyn,  105  N.  C.  498,  10 
S.  E.  1099.  But  see  Lancaster  Bank  v.  Woodward,  18  Pa.  357,  57 
Am.  Dec.  018. 

The  authority  of  a  cashier  to  allow  an  overdraft  cannot  be  ques- 
tioned in  an  action  by  the  bank.  Union  Gold  Mining  Co.  v.  Rocky 
Mountain  Nat.  Bank,  2  Colo.  248.  See  "Banks  and  Banling,"  Dec. 
Dig.  (Key  No.)  §  150;  Cent.  Dig.  §§  455-Ji6J,y2. 

245ix)an  &  Exchange  Bank  v.  Miller,  39  S.  C.  175,  17  S.  E.  592. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  150;  Cent.  Dig.  §§ 

J,55-J,6W2. 

246  Owens  V.  Stapp,  32  111.  App.  653;  Union  Bank  v.  Sollee,  2  Strob. 
(S.  C.)  390.  See,  also,  Hubbard  v.  Charlestown  Branch  R.  Co.,  11 
Mete.  (Mass.)  124.  Cf.  Talbot  v.  First  Nat.  Bank,  106  Iowa,  361,  76 
N.  W.  726.  See  "Batiks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  150; 
Cent.  Dig.  §§  .^55-J,6W2- 


84  DEPOSITS  (Ch.  2 

of  damages,  and  the  rendering  of  an  account  showing  a  bal- 
ance due  from  overdrafts  is  a  sufficient  demand.^*^  In  an  ac- 
tion for  an  overdraft,  mere  production  of  the  check  does  not 
make  a  prima  facie  case;  ^*^  but  the  bank  must  estabhsh  the 
overdraft  by  showing  the  whole  state  of  the  account,  and  all 
evidence  going  to  show  it,  including  checks,  drafts,  and  notes 
paid,  is  admissible. ^*^  ^ 

When  an  account  is  overdrawn,  the  bank  may,  of  course, 
apply  subsequent  general  deposits  to  the  payment  of  the  bal- 
ance due.'^" 

STATEMENT  OF  ACCOUNT 

26.  EFFECT — Where  a  bank  renders  a  statement  of  a  de- 

positor's account,  accompanied  by  his  checks  and 
other  vouchers  for  payments  made  and  charged, 
such  statement,  if  retained  by  ttTe  depositor  with- 
out objection  within  a  reasonable  time,  constitutes 
an  account  stated,  which  may  be  impeached  only 
for  fraud  or  mistake. 

27.  DUTY  OF  DEPOSITOR— It  is  the  duty  of  the  de- 

positor, within  a  reasonable  time,  to  examine  such 
statement  and  vouchers,  and  to  exercise  reasonable 
diligence  therein,  and  to  notify  the  bank  of  an  er- 
roneous charge,  such  as  a  charge  for  the  payment 
of  a  forged  check;   and  if  he  fails  so  to  do,  and  the 

247  Casey  v.  Carver,  42  111.  225.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  150;  Cent.  Dig.  §§  .}. 55-.) 6^  1/2. 

248  state  Bank  v.  Clark,  8  N.  C.  36;  Bank  of  the  United  States  v. 
Washington,  Fed.  Cas.  No.  940,  3  Cranch  C.  C.  295.  8ee  ''Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  150;  Cent.  Dig.  §§  J^oS-iOWz. 

249  Jack  V.  Moyer,  187  Pa.  87,  40  Atl.  1013.  See,  also,  Hudson 
Tnast  Co.  v.  Chappelle  (Sup.)  108  N.  Y.  Supp.  1005 ;  Cox  v.  Bank  of 
Hartsville  (Tenn.  Ch.)  63  S.  W.  237 ;  Walker  Bros.  v.  Skliris,  34  Utah, 
353,  98  Pac.  114.  See  "Banks  and  Banking,"  Dec.  Dig.  {Keg  No.) 
§  150;  Cent.  Dig.  §§  Ji55-J,6W2- 

250  First  Nat.  Bank  v.  City  Nat.  Bank,  102  Mo.  App.  357,  76  S.  W. 
489.     See  Nichols  v.  State,  46  Neb.  715,  65  N.  W.  774.     Cf.  Hale  v. 


§§  26-27)  STATEMENT   OF   ACCOUNT  85 

bank,  if  thereafter  required  to  correct  the  error, 
would  thereby  suffer  damage,  the  depositor  is  pre- 
cluded, at  least  to  that  extent,  from  disputing  the 
right  of  the  bank  to  make  the  erroneous  charge. 

Effect  of  Statement 

It  is  customary  for  the  bank  to  make  a  statement  of  the 

depositor's  account  from  time  to  time.     Usually  this  is  done 

by  balancing  the  pass  book  and  returning  it  to  the  customer, 

,  with  the  checks  drawn  by  him  and  other  orders  for  payments 

which  have  been  made  and  charged  to  the  account. 

The  sending  of  the  pass  book  to  be  written  up  and  returned 
with  the  vouchers  is,  in  effect,  a  demand  to  know  w'hat  the 
bank  claims  to  be  the  state  of  the  account ;  and  the  return  of 
the  book  with  the  vouchers  is  the  answer  to  that  demand,  and, 
in  effect,  imports  a  request  that  the  depositor  wall  in  proper 
time  examine  the  account  so  rendered,  and  either  sanction  it 
or  repudiate  it.-"^  When  the  pass  book  is  written  up  and  is 
retained  by  the  depositor,  without  objection  within  a  reason- 
able time,  it  constitutes  an  account  stated ;  and  thereafter  it 
can  be  impeached  only  for  fraud  or  mistake.^^^  Charges  for 
interest  or  commissions,  for  example,  cannot  be  questioned  by 
I'.-.e  depositor  if  he  has  failed  to  object  to  them  within  a  rea- 

lii.  hards,  80  Iowa,  164,  45  N.  W.  734;  Bank  of  United  States  v. 
Macalester,  9  Pa.  475. 

Where  a  letter  inclosing  a  note  asked  the  hank  to  discount  it  and 
to  charge  an  overdraft  to  the  credit,  the  hanker,  having  declined  the 
credit,  could  not  hold  the  note  as  collateral.  Bank  of  Montreal  v. 
White,  154  U.  S.  GOO.  14  Sup.  Ct.  Il91,  2G  L.  Ed.  307 ;  ante,  p.  20. 
-See  "Banlcs  and  Ba)iking,"  Dec.  Dig.  (Key  JMo.)  §  150;  Cent.  Dig  §§ 
>,o5-mV2. 

2  51  Harlan,  ,T.,  in  Leather  Manufacturers'  Nat.  Bank  v.  Morgan.  117 
U.  S.  9G,  G  Sup.  Ct.  657,  29  L.  Ed.  811.  See  "Account  Stated,"  Dec. 
Dig.  (Ken  ^'o.)  §  6;    Cent.  Dig.  %  35. 

2.-2  Favry  v.  Farmers'  &  Mechanics'  Bank  (N.  J.  Ch.)  58  Atl.  305; 
Nodine  v.  First  Nat.  Bank,  41  Or.  38G,  68  Pac.  1109.  But  see  Mc- 
Graw  V.  Traders'  Nat.  Bank,  G4  W.  Va.  509,  63  S.  E.  398.  See  "Ac- 
count Stated,"  Dec.  Dig.  (Key  No.)  §  6;  Cent.  Dig.  §  85. 


86  DEPOSITS  (Ch.  2 

sonable  time.^''^  The  writing  up  of  a  pass  book  with  a  re- 
turn of  the  vouchers  does  not,  of  course,  preckide  the  bank, 
if  it  has  made  mistakes  in  favor  of  the  depositor,  from  having 
them  corrected;  nor  does  the  mere  failure  of  the  depositor 
to  object  to  the  statement  within  a  reasonable  time  preclude 
the  depositor  from  showing  mistakes  or  fraud  in  the  account; 
but  after  the  lapse  of  a  reasonable  time  for  examination  and 
correction  the  statement  will  be  deemed  prima  facie  correct, 
and  the  burden  of  showing  fraud  or  mistake  will  be  upon  the 
party  who  disputes  it.^^* 

Duty  of  Depositor  to  Examine 

A  different  question  is  presented  where  the  depositor  fails 
to- object  after  discovering  an  error,  or  fails  to  examine  the 
statement  and  vouchers  within  a  reasonable  time  after  their 
return,  or  fails  to  exercise  reasonable  diligence  in  such  ex- 
amination, and  the  bank,  if  thereafter  required  to  correct  an 
error  in  the  account,  would  suffer  an  injury  from  which  it 
might  have  protected  itself,  but  for  the  negligence  of  the  de- 
positor. This  question  is  frequently  presented  where  the  bank 
has  returned  among  its  vouchers  a  check  which  it  was  not  au- 
thorized to  pay,  because  the  signature  of  the  depositor  was 
forged  or  because  the  check  had  been  altered.^ ^^  In  such 
cases  it  is  now  held  that  a  duty  rests  upon  the  depositor,  either 
personally  or  by  his  agent,  to  examine  the  vouchers  within  a 
reasonable  time  after  their  return,  and  that  if  he  fails  so  to 
do,  or  fails  to  exercise  ordinary  diligence  in  such  examination, 
and  consequently  fails  to  discover  and  to  notify  the  bank  of 

2B3  Schoonover  v.  Osborne,  108  Iowa,  453,  79  N.  W.  2G3 ;  Williamson" 
V.  Williamson,  L.  R.  7  Eq.  542.     See  "Account  Stated,"  Dec.  Dig. 
(Key  A^o.)  §§  6,  8;   Cent.  Dig.  §§  35,  50-56. 

254  McLaughlin  v.  First  Nat.  Bank  of  Pana,  71  111.  App.  329;  Farry 
V.  Farmers'  &  Mechanics'  Bank  (N.  J,  Ch.)  58  Atl.  305;  Weisser's 
Adm'rs  v.  Denison,  10  N.  Y.  68,  61  Am.  Dec.  731.  See  cases  cited 
in  notes  255.  256,  post.  See  "Account  Stated,'"  Dec.  Dig.  {Key  Xo.) 
i  19;   Cent.  Dig.  §§  91-93. 

255  Post,  p.  159. 


§§  26-27)  8TATEMKNT   OF   ACCOUNT  87 

the  forgery,  and  the  bank  thereby  suffers  damage,  lir^ts  pre- 
cluded, at  least  to  the  extent  of  such  damages,-^*  from  dis- 
puting the  right  of  the  bank  to  charge  him  with  the  amount  of 

2C0  First  Nat.  Bank  of  Birniinsbaiu  v.  Allen.  100  Ala.  4TG,  14  South. 
335,  27  L.  R.  A.  4L'(;,  40  Aui.  St.  Kep.  80;  Janin  v.  London  &  Sau 
Francisco  Bank.  92  Cal.  14.  27  Pac.  1100,  14  L.  R.  A.  320,  27  Am. 
St.  Rep.  S2 ;  Critten  v.  Chemical  Nat.  Bank,  171  N.  Y.  219.  63  N.  E. 
9G9,  57  L.  R.  A.  529;  Weinstein  v.  National  Bank  of  Jefferson,  69 
Tex.  38,  6  S.  W.  171,  5  Am.  St.  Rep,  23.  Compare  Leather  Manu- 
facturers' Nat.  Bank  v.  Morgan,  117  U.  S.  96,  6  Sup.  Ct.  657,  29  'L. 
Ed.  811,  where  Harlan,  J.,  observes:  "Still  further,  if  the  depositor 
was  guilty  of  negligence  in  not  discovering  and  giving  notice  of  the 
fraud  of  his  clerk,  then  the  bank  was  thereby  prejudiced,  because  it 
was  prevented  from  taking  steps,  by  the  arrest  of  the  criminal,  or 
by  an  attachment  of  his  property,  or  other  form  of  proceeding,  to 
compel  restitution.  It  is  not  necessary  that.it  should  be  made  to 
appear,  by  evidence,  that  benefit  would  certainly  have  accrued  to  the 
Itauk  from  an  attempt  to  secure  payment  from  the  criminal.  Whether 
the  depositor  is  to  be  held  as  having  ratified  what  his  clerk  did,  or 
to  have  adopted  the  checks  paid  by  the  bank  and  charged  to  him. 
cannot  be  made,  in  this  action,  to  depend  upon  a  calculation  whether 
the  criminal  had  at  the  time  the  forgeries  were  committed,  or  subse- 
quently, property  sufficient  to  meet  the  demands  of  the  bank.  An 
inquiry  as  to  the  damages  in  money  actually  sustained  by  the  bank 
by  reason  of  the  neglect  of  the  depositor  to  give  notice  of  the  forger- 
ies might  be  proper,  if  this  w^ere  an  action  by  it  to  recover  damages 
for  a  violation  of- his  duty.  But  it  is  a  suit  by  the  depositor,  in 
effect,  to  falsify  a  stated  account  to  the  injury  of  the  bank,  whose 
defence  is  that  the  depositor  has,  by  his  conduct,  ratified  or  adopted 
the  payment  of  the  altered  checks,  and  thereby  induced  it  to  for- 
bear taking  steps  for  its  protection  against  the  person  committing 
the  forgeries.  As  the  right  to  seek  and  compel  restoration  and  pay- 
ment from  the  person  committing  the  forgeries  was,  in  itself,  a 
valuable  one,  it  is  sufficient  if  it  appears  that  the  bank,  by  reason 
of  negligence  of  the  depositor,  was  prevented  from  promptly,  and  it 
may  be  effectively,  exercising  it." 

A  depositor,  failing  promptly  to  notify  a  bank  after  discovering 
a  forgery,  cannot  recover  of  the  bank  irrespective  of  whether  it  could 
have  protected  itself  had  it  been  promptly  notilied.  McNeely  Co.  v. 
Bank  of  North  America,  221  Pa.  588,  70  Atl.  891,  20  L.  R.  A.  (N.  S.) 
79.     See,  also,  Cunningham  v.  First  Nat.  Bank  of  Indiana,  219  Pa. 


88  DEPOSITS  (Ch.2 

the  forged  check,  provided  the  forgery  was  not  so  that  the 
bank  could  by  proper  care  and  skill  have  discovered  it."^^ 

In  some  cases  the  doctrine  has  been  placed  upon  the  ground 
that  by  his  negligence  the  depositor  either  adopts  the  check 
as  genuine  and  ratifies  its  payment,- ^^  or  else  estops  himself 
from  asserting  that  it  is  a  forgery.^ ^^  Other  cases  more  con- 
sistently place  it  upon  the  ground  that  a  duty  to  examine  the 
account  rests  upon  the  depositor,  and  that  for  a  neglect  of 
such  duty  he  is  liable  to  the  extent  of  the  damages  sustained 
by  the  bank  in  consequence  of  such  neglect.^*'"  "If  the  depos- 
itor has,  by  his  negligence  in  failing  to  detect  forgeries  in  his 

310,  68  Atl.  731,  123  Am.  St.  Rep.  657.     See  "Banks  and  Banking," 
Dec.  Dig.  {Key  .A'o.)  §  i-JS;   Cent.  Dig.  §§  Ji38-J,52. 

257  Leather  Manufacturers'  Nat.  Bank  v,  Morgan,  117  U.  S.  96.  6 
Sup.  Ct.  657,  29  L.  Ed.  811 ;  First  Nat.  Bank  of  Birmingham  v.  Allen, 
100  Ala.  476,  14  South.  335,  27  L.  R.  A.  426,  46  Am.  St.  Rep.  SO ;  Neal 
V.  First  Nat.  Bank,  26  Ind.  App.  503,  60  N.  E.  164;  Israel  v.  State 
Nat.  Bank  of  New  Orleans,  124  La.  885,  50  South.  783;  Hardy  v. 
Chesapeake  Bank,  51  Md.  562,  34  Am.  Rep.  325;  Dana  v.  National 
Bank  of  Republic,  132  Mass.  156 ;  Scanlon-Gipson  Lumber  Co.  v.  Ger- 
mania  Bank,  90  Minn.  478,  97  N.  W.  380;  Myers  v.  Southwestern 
Nat.  Bank,  193  Pa.  1,  44  Atl.  280,  74  Am.  St.  Rep.  672;  Brown  v. 
Lynchliurg  Nat.  Bank,  109  Va.  530,  64  S.  E.  950.  Cf.  Manufacturers' 
Nat.  Bank  v.  Barnes,  65  111.  69,  16  Am.  Rep.  576. 

The  depositor's  failure  to  examine  and  notify  is  no  defense,  if  the 
bank  by  reasonable  care  could  have  detected  the  forgery.  New  York 
Produce  Exchange  Bank  v.  Houston,  169  Fed.  785,  95  C.  C.  A.  251. 
Sec  "Banks  and  Banking,"  Dec.  Dig.  (Key  ]\'o.)  §  i-JS;  Cent.  Dig.  §§ 
J,38-J,52. 

258  Dana  v.  National  Bank  of  Republic,  132  Mass.  156.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  IJfS;   Cent.  Dig.  §§  Ji3S-452. 

259  Leather  Manufacturers"  Nat.  Bank  v.  Morgan,  117  U.  S.  96,  G 
Sup.  Ct.  657,  29  L.  Ed.  811 ;  McNeely  Co.  v.  Bank  of  North  America, 
221  Pa.  588,  70  Atl.  891,  20  L.  R.  A.  (N.  S.)  79;  National  Bank  of 
Commerce  of  Tacoma,  Wash.,  v.  Tacoma  Mill  Co.,  182  Fed.  1,  104  C. 
C.  A.  441.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  l.',8; 
Cent.  Dig.  §§  J,3S-Ji52. 

2C0  First  Nat.  Bank  of  Birmingham  v.  Allen,  100  Ala.  476,  14  South. 
335,  27  L.  R.  A.  426,  46  Am.  St.  Rep.  80;  Critten  v.  Chemical  Nat. 
Bank.  171  N.  Y.  219,  63  N.  E.  969,  57  L.  R.  A.  529 ;    National  Dredg- 


§§  26-27)  STATEMENT  OF   ACCOUNT  89 

checks  and  give  notice  thereof,  caused  loss  to  his  banl<7eithef 
by  enabling  the  forger  to  repeat  his  fraud  or  by  depriving  the 
bank  of  an  opportunity  .to  obtain  restitution,  he  sl.ould  be 
responsible  for  the  damage  caused  by  his  default,  bu:  beyond 
that  his  liability  should  not  extend."  ^"^ 

Although  the  depositor  delegates  the  examination  of  the 
vouchers  to  the  same  person  who  forged  or  altered  the  check. 
he  is  chargeable  with  the  knowledge  of  that  person,  not  upon 
the  ground  that  he  is  aflfected  with  the  knowdedge  gained  by 
the  agent  in  perpetrating  the  fraud,  but  upon  the  ground  that, 
the  duty  o."  examination  resting  upon  the  depositor,  he  is 
charged  with  the  neglect  or  fraud  of  his  agent  in  making  such 
examination.'*'' 

Cases  of  forged  indorsements  are  to  be  distinguished,  since 
the  drawer  of  a  check  cannot  be  expected  to  know  the  signa- 
ture of  the  payee  or  other  indorsers,  and  an  examination  by 

iiii;  Co.  V.  President,  etc.,  of  Farmers'  Bank,  6  Pennewill  (Del.)  580, 
GO  Atl.  GOT.  10  L.  R.  A.  (N.  S.)  593,  130  Am.  St.  Rep.  158.  See  "Banks 
and  Bankina,"  Dec.  Dig.  {Key  No.)  §  148;   Cent.  Dig.  §§  J,3S-.',52. 

261  Cullen,  J.,  in  Critten  v.  Chemical  Nat.  Bank,  171  N.  Y.  219,  03 
N.  E.  909,  57  L.  R.  A.  529.  In  this  case  it  was  also  held  that  the 
ne^li.!;ence  of  a  bank  in  paying  to  a  cleru  of  the  depositor  a  check 
which  was  plainly  altered  by  the  substitution  of  the  word  "Cash" 
for  the  name  of  the  payee,  and  on  which  the  number  of  dollars  was 
also  written  over  an  erasure,  without  inquiry  as  to  thr  alterations, 
renders  the  bank  liable  for  loss  thereby  sustained,  anc  contributes 
to  the  continuance  of  similar  forgeries  by  the  clerk,  so  as  to  defeat 
the  liability  of  the  depositor  for  loss  to  the  bank  from  the  payment 
of  subsequently  raised  checks  on  the  ground  of  his  negligence  in  fail- 
ing to  examine  the  returned  vouchers  from  the  bank.  See  "Banks 
and  Banking;'  Dec.  Dig.  {Key  No.)  §  l.',8;  Cent.  Dig.  §§  Ji38-452. 

2C2  Leather  Manufacturers'  Nat.  Bank  v.  Morgan,  117  U.  S.  96,  G 
Sup.  Ct.  657,  29  L.  Ed.  811 ;  First  Nat.  Bank  of  Birmingham  v.  Al- 
len, lOO  Ala.  470,  14  South.  335,  27  L.  R.  A.  420,  46  Am.  St.  Rep.  80 ; 
Dana  v.  National  Bank  of  Republic,  132  Mass.  156;  Critten  v.  Chem- 
ical Nat.  Bank,  171  N.  Y.  219,  03  N.  E.  9(;9.  57  L.  R.  A.  529;  Myers  v. 
Southwestern  Nat.  Bank,  193  Pa.  1,  44  Atl.  280,  74  Am.  St.  Rep.  072 ; 
Contra:  Hardy  v.  Chesapeake  Bank,  51  Md.  562,  34  Am.  Rep.  325; 
Kenneth  Inv.  Co.  v.  National  Bank  of  the  Republic,  103  Mo.  App. 


90  DEPOSITS  (Ch.  2 

the  depositor  would  not  disclose  to  him  whether  or  not  the  in- 
dorsements are  genuine,  and  consequently  there  can  be  no 
duty  resting  upon  him  to  make  such  examination,  and  no 
estoppel  by  reason  of  his  failure  to  examine  indorsements.^^* 


ACTION  FOR   DEPOSIT 

28.  DEMAND  AND  LIMITATION— An  action  by  a  de- 

positor to  recover  a  general  deposit  does  not  ac- 
rue.  and  the  statute  of  limitations  does  not  begin 
to  run,  until  a  demand  for  payment  has  been  made ; 
but  a  demand  may  be  dispensed  with,  if  the  cir- 
cumstances are  such  that  it  would  be  manifestly 
futile. 

29.  BURDEN  OF  PROOF— If  a  deposit  was  made,  the 

burden  is  upon  the  bank  to  prove  payment  to  a 
proper  person. 

Demand 

Although  the  relation  between  the  bank  and  its  depositor 
is  that  of  debtor  and  creditor,  it  is  the  undertaking  of  the  bank 

613,  77  S.  W.  1002.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
US;  Cent.  Dig.  §§  438-1/52. 

2  0  3  Atlanta  Nat.  Bank  v.  Burke,  81  Ga.  597,  7  S.  E.  738,  2  L.  R. 
A.  96;  German  Savings  Bank  of  Davenport  v.  Citizens'  Nat.  Bank, 
101  Iowa,  530,  70  N.  W.  76t.  63  Am.  St.  Rep.  399 ;  Jordan  Marsh  Co. 
V.  National  Shawmut  Bank,  201  Mass.  397,  87  N.  E.  740,  22  L.  R.  A. 
(N.  S.)  250 ;  SMpman  v.  iBank  of  the  State  of  New  York,  126  N.  Y. 
318,  27  N.  E.  371,  12  L.  R.  A.  791,  22  Am.  St.  Rep.  821 ;  Harter  v. 
Mechanics'  Nat.  Bank,  63  N.  J.  Law,  578,  44  Atl.  715,  76  Am.  St.  Rep. 
224;  Kearny  v.  Metropolitan  Trust  Co.  of  City  of  New  York,  110 
App.  Div.  236,  97  N.  Y.  Supp.  274 ;  United  Security  Life  Ins.  &  Trust 
Co.  of  Pennsylvania  v.  Central  Nat.  Bank,  185  Pa.  586,  40  Atl.  97; 
Pollard  V.  Wellford,  99  Tenn.  113,  42  S.  W.  23;  Brixen  v.  Deseret 
Nat.  Bank,  5  Utah,  504,  18  Pac.  43. 

Failure  to  notify  the  bank  immediately  after  discovery  did  nor 
prevent  recovery,  in  the  absence  of  a  showing  that  the  position  uf 
bank  was  changed  for  worse  by  the  delay.     Murphy  v.  Metropolitao 


§§  28-29)  ACTION    FOR   DEPOSIT  91 

to  pay  only  at  its  banking  house,  when  payment  shall  "5e~called 
for  there;  that  is,  upon  demand. ^^*  Demand,  therefore,  is  a 
condition  precedent  to  the  right  of  a  depositor  to  maintain  an 
action  for  the  recovery  of  a  deposit,  unless  for  special  reasons 
demand  is  excused.-"'^  Demand,  or  the  facts  which  excuse  it, 
must  be  alleged  in  the  declaration  or  complaint.-^"  The  law 
does  not  generally  require  a  man  to  do  a  futile  act;  and  con- 
sequently the  necessity  of  demand  is  dispensed  with  if  the 
bank  notifies  the  depositor  that  his  demand  will  not  be  honor- 
ed,-*^ or  denies  the  existence  of  a  dcposit,^^^  or  claims  the 
deposit  as  its  own  '^^  or  as  another's,  ^^°  or  accepts  a  deposit 

Nat.  Bank,  191  Mass.  159,  77  N.  E.  693,  114  Am.  St.  Rep.  .',95 ;  Pratt 
V.  Union  Nat.  Bank,  79  N.  J.  Law,  117,  75  Atl.  313.  See  ''Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  1J,8;   Cent.  Dig.  §§  Ji38-jlf52. 

264  Ante,  p.  56. 

265Brahm  v.  Adkins,  77  111.  L'63 ;  Clark's  Adm'r  v.  Farmers'  Nat. 
Bank  of  Richmond,  124  Ky.  563,  99  S.  W.  674;  Adams  v.  Orange 
County  Bank,  17  Wend.  (N.  Y.)  514;  Downes  v.  Phamix  Bank,  6 
Hill  (N.  Y.)  297  (although  a  balance  has  been  struck  in  the  bank 
l)ook  in  the  depositor's  favor).  See  cases  cited  in  note  277,  post. 
isee  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  154;  Cent.  Dig.  §§ 
509,  510. 

.2  66  Tobias  v.  Morris,  126  Ala.  535,  28  South.  517.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  15^;   Cent.  Dig.  §§  516-517. 

267  Farmers'  &  Mechanics'  Bank  of  Georgetown  v.  Planters'  Bank 
of  Prince  George's  County,  10  Gill  &  J.  (Md.)  422.  Passing  the  bal- 
anced deposit  book  back  to  the  depositor,  the  attention  of  the  parties 
not  being  directed  to  an  overcharge,  is  not  a  refusal.  Goodell  v. 
Brandon  Nat.  Bank,  63  Vt.  303,  21  Atl.  950,  25  Am.  St.  Rep.  766. 
Where  a  check  is  paid  on  the  forged  indorsement  of  the  payee,  a  de- 
maud  for  payment  of  the  canceled  check  is  not  a  condition  precedent? 
Pratt  V.  Union  Nat.  Bank,  79  N.  J.  Law,  117,  75  Atl.  313.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  154;  Cent.  Dig.  §§  509,  510. 

26  8  Miller  V.  Western  Nat.  Bank,  172  Pa.  197,  33  Atl.  6S4.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  154;  Cent.  Dig.  §§  500- 
510. 

269  Bank  of  Missouri  v.  Benoist,  10  Mo.  520;  Delahunty  v.  Central 
Nat.  Bank,  37  X\\^.  Div.  434,  56  N.  Y.  Supp.  40.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  154;   Cent.  Dig.  §§  500,  510. 

->i  Carroll  v.  Cone,  40  Barb.  (N.  Y.)  220.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  154;   Cent.  Dig.  §§  509,  510. 


92  DEPOSITS  (Ch.  2 

upon  an  illegal  agreement,-'^  or  suspends  payment  and  dis- 
continues the  operations  of  banking,-^^ 

Statute  of  Limitation 

The  period  of  limitation  within  which  an  action  to  recover 
a  deposit  may  be  brought,  of  course  depends  upon  the  statute 
in  the  particular  jurisdiction. "^  Where  the  limitation  was 
five  years  for  an  action  "upon  any  agreement,  contract  or 
promise  in  writing,"  and  three  years  for  an  action  "upon  a 
contract  not  in  writing,"  it  was  held  that  a  pass  book  is  not 
a  written  contract,  and  that  the  three-year  limitation  govern- 
ed.^'* On  the  other  hand,  where  the  limitation  was  five  years, 
for  actions  "on  unwritten  contracts,  express  or  implied,"  and 
ten  years  for  actions  "on  written  contracts,  or  other  evidences 
of  indebtedness  in  writing,"  it  was  held  that  the  ten-year  lim- 

271  White  V.  President,  etc.,  of  Franklin  Bank,  22  Pick.  (Mass.) 
181.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  15.'t;  Cent. 
Dig.  §§  509,  510. 

27  2  Schinotti  v.  Whitney  (C.  C.)  130  Fed.  780;  Wheeler  v.  Commer- 
cial Bank  of  Moscow,  5  Idaho,  15,  46  Pac.  8.30;  White  v.  Meadow- 
croft,  91  111.  App.  293;  Planters'  Bank  of  Prince  George's  County 
V.  Farmers'  &  Mechanics'  Bank  of  Georgetown,  8  Gill  &  J.  (Md.)  449 ; 
Watson  V.  President,  etc.,  of  Phoenix  Bank,  8  Mete.  (Mass.)  217,  41 
Am.  Dec.  500. 

The  mere  appointment  of  a  temporary  receiver  pending  an  action 
for  the  bank's  dissolution,  instituted  by  the  superintendent  of  bank- 
ing without  consent  of  the  bank  otficers,  does  not  excuse  demand. 
Sickles  V.  Herold,  149  N.  Y.  332,  43  N.  E.  852.  See  ''Banks  and 
Banking;'  Dec.  Dig.  (Key  No.)  §  154;    Cent.  Dig.  §§  509,  510. 

27  3  !See  Pott  V.  Clegg,  10  M.  &  W.  327;  Schinotti  v.  Whitney  (C. 
C.)  130  Fed.  780  (Louisiana  statute) ;  Green  v.  Odd  Fellows  Savings 
&  Commercial  Bank,  65  Cal.  71,  2  Pac.  887  (no  limitation) ;  Cole  v. 
Charles  City  Nat.  Bank,  114  Iowa,  632,  87  N.  W.  671 ;  Quattrochi  v. 
Farmers'  &  Merchants'  Bank,  89  Mo.  App.  500.  See  "Banks  and 
Banking;'  Dec.  Dig.  (Key  No.)  §  15J,;  Cent.  Dig.  §§  50.'t-507 ;  "Limi- 
tation of  Actions;'  Dec.  Dig.  (Key  No.)  §  25;   Cent.  Dig.  §  12G. 

274Talcott  V.  First  Nat.  Bank,  53  Kan.  480,  36  Pac.  1066,  24  L.  R. 
A.  737.  -See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  154;  Cent. 
Dig.  §§  504-501;  "Limitation  of  Actions,"  Dec.  Dig.  (Key  No.)  §  154; 
Cent.  Dig.  §§  504-507. 


§§  28-29)  ACTION    FOR    DEPOSIT  93 

itation  governed.- '°  A  publication  of  unclaimed  jieposits, 
made  in  pursuance  of  a  statute,  has  been  held  to  be  an  ac- 
knowledgment of  indebtedness,  suspending  the  operation  of 
the  statute  of  limitations.-^" 

Since  an  action  to  recover  a  deposit  does  not  accrue  until  a 
payment  has  been  demanded  and  refused,  the  statute  does  not 
begin  to  run  until  demand,-'^  unless  demand  has  been  waived 
or  is  otherwise  excused.^^^  Although  by  the  better  rule  the 
holder  of  a  check  cannot  maintain  an  action  against  the  bank, 
the  presentment  of  a  check  by  the  holder  is  a  sufficient  de- 
mand, and  the  refusal  of  the  bank  to  honor  a  check  so  pre- 
sented sets  the  statute  running.^^^     The  demand  is  not  suffi- 

2T6  Schalucky  v.  Field.  124  111.  617,  16  N.  E.  904,  7  Am.  St.  Rep. 
309.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  154;  Cent. 
Dig.  §§  50Jf-507;  "Limitation  of  Actions,"  Dec.  Dig.  (Key  No.)  §  25; 
Cent.  Dig.  §  126. 

276  Adams  v.  Orange  County  Bank,  17  Wend.  (N.  Y.)  514.  f?cf 
"Limitation  of  Actions,"  Dec.  Dig.  (Key  No.)  §  UfSj   Cent.  Dig.  §  58J . 

-'->  Starr  v.  Stiles,  2  Ariz.  436,  19  Pac.  225;  Branch  v.  Dawsor 
33  Minn.  399,  23  X.  W.  552;  Missouri  Pac.  Ry.  Co.  v.  Continental 
Niit.  Bank,  212  Mo.  505,  111  S.  W.  574,  17  L.  R.  A.  (N.  S.)  994 ;  Citi- 
zens' Bank  of  Humphi-ey  v.  Fromholz,  64  Neb.  284,  89  N.  W.  775; 
Girard  Bank  v.  Bank  of  Penn  Tp.,  39  Pa.  92,  80  Am.  Dec.  507 ;  Koel- 
zer  V.  First  Nat.  Bank  of  Whitewater,  125  Wis.  595,  104  N.  W. 
83S,  2  L.  R.  A.  (X.  S.)  571,  110  Am.  St.  Rep.  870.  Contra :  Locke  v. 
First  Nat.  Bank  of  Gonic,  65  N.  H.  670,  23'  Atl.  529  (runs  from  de 
posit). 

The  statute  begins  to  run  from  the  date  of  the  monthly  balance 
struck  in  the  depositor's  bank  book.  President,  etc.,  of  Union  Bank 
V.  Knapp,  3  Pick.  (Mass.)  96,  15  Am.  Dec.  181.  See  ''Limitation  of 
Actions,"  Dec.  Dig.  (Key  No.)  §  66;  Cent.  Dig.  §§  260,  362;  "Banks 
and  Banking,"  Cent.  Dig.  §  509. 

278  See  cases  cited, in  notes  267-272,  ante.  See  "Limitation  of  Ac- 
tions," Dec.  Dig.  (Key  No.)  §  66;  Cent.  Dig.  §  362. 

27  0  Munnorlyn  v.  Augusta  Savings  Bank,  88  Ga.  333,  14  S.  E.  5.54. 
30  Am.  St.  Rep.  159;  Viets  v.  Union  Nat.  Bank  of  Troy,  101  N.  Y. 
503.  5  X.  E.  457,  54  Am.  Rep.  743. 

Where  the  bank  paid  a  check  under  a  forged  indorsement,  and  on 
discovering  the  forgery  after  seven  years  the  depositor  made  de- 
mand, the  check  was  not  a  demand,  and  the  action  was  not  barre*!. 


94  DEPOSITS  (Ch.  2 

cient  if  the  check  exceeds  the  amount  of  the  depositor's  bal- 
ance.^^°  Drawing  a  check  for  the  balance  standing  to  the 
depositor's  credit  is  a  demand,  however,  only  for  that  amount, 
and  the  statute  does  not  begin  to  run  from  the  time  of  pre- 
sentment as  to  an  amount  with  which  he  had  been  charged  by 
mistake,  to  which  the  attention  of  the  parties  was  not  then 
directed. ^*^ 

Burden  of  Proof 

Where  it  appears  that  a  deposit  has  been  made,  the  burden 
is  upon  the  bank  to  prove  paymenf  to  or  for  the  use  of  the 
depositor.^^"  If  the  bank  has  paid  a  check  to  an  indorsee,  for 
which  it  claims  credit,  the  burden  is  upon  the  barlk  to  prove 
the  sfenuineness  of  the  indorsement.^^^     But  if  the  bank  has 


Bank  of  British  North  America  v.  IMerchants'  Nat.  Bank,  91  N.  T. 
106.  See  "■Limitation  of  Actions"  Dec.  Dig.  {Key  No.)  §  66;  Cent 
Dig.  §  362. 

280  Aurora  Nat.  Bank  v.  Dils,  18  Ind.  App.  319,  48  N.  E.  19.  See, 
also,  Hales  v.  Seamen's  Bank,  28  App.  Div.  407,  51  N.  Y.  Supp.  140. 
See  ''Banks  and  Banking"  Dec.  Dig.  (Key  No.)  §  l-5Jt;  Cent.  Dig.  §§ 
509,  510;  "Liinitation  of  Actions,"  Dec.  Dig.  {Key  A'O.)  §  66;  Ceni 
Dig.  §§  3.53-375. 

281  Goodell  V.  Brandon  Nat.  Bank,  G3  Vt.  303,  21  Atl.  956,  25  Am. 
St.  Rep.  766.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  15h' 
Cent.  Dig.  §§  509,  510;  "Limitation  of  Actions,"  Dec.  Dig.  (Key  No.) 
§  66;  Cent.  Dig.  §§  353-375. 

28  2  De  Land  v.  Dixon  Nat.  Bank,  111  111.  323;  Padgett  v.  Bank 
of  Mountain  View,  141  Mo.  App.  374,  125  S.  W.  219;  Patterson  v. 
First  Nat.  Bank  of  Humboldt,  73  Neb.  3S4.  102  N.  W.  765 ;  Wiggins 
V.  Stevens,  33  App.  'Div.  83,  53  N.  Y.  Supp.  90 ;  Yarborough  v.  Bank- 
ing Loan  &  Trust  Co.,  142  N.  C.  377,  55  S.  E.  296;  O'Neil  v.  New 
England  Trust  Co.,  28  R.  I.  311,  67  Atl.  63,  11  L.  R.  A.  (N.  S.)  248, 
125  Am.  St.  Rep.  740;  Kuenster  v.  Woodhouse.  101  Wis.  216,  77  N. 
W.  165.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  15^;  Cent 
Dig.  §§  518-521. 

283  Morgan  v.  Bank  of  State  of  New  York,  1  Duer  (N.  Y.)  434;  Au- 
gust V.  Fourth  Nat.  Bank,  48  Hun,  620,  1  N.  Y.  Supp.  139.  See,  also. 
Second  Nat.  Bank  of  New  Albany  v.  Gibboney,  43  Ind.  App.  492,  87 
N.  E.  1064. 

The  burden  is  on  the  bank  to  show  that  the  payment  was  to  the 


5§  28-29)  ACTION    FOR    DKPOSIT  95 

rendered  a  statement  of  the  account,  which  the  depos44«r  has 
retained  for  an  unreasonable  time  without  objection,  the  bur- 
den is  ujKin  liim  to  show  tliat  the  statement  was  erroneous.-** 
Where  the  depositor  has  given  the  bank  timely  notice  not  to 
pay  a  check,  the  burden  is  on  the  bank  to  prove  that  it  had 
already  been  paid.-*^ 

Prima  facie  the  title  to  a  deposit  is  in  the  depositor,-**"  and 
if  the  bank  pays  to  another  the  burden  is  upon  it  to  show  that 
he  was  entitled  to  it.-*^ 

A  claimant  in  an  interpleader  suit  must  show  a  clear  title.--* 

person  named  in  the  check,  or  that  the  depositor  was  guilty  of  neg- 
ligence precluding  him  from  disputing  it.  Murphy  v.  Metropolitan 
Nat.  Bank,  191  Mass.  159,  77  N.  E.  G93,  114  Am.  St.  Rep.  595.  -See 
'•Bauls  and  Banking,"  Dec.  Dig.  {Key  No.)  §  151/;  Cent.  Dig.  §§ 
518-521. 

284  Anderson  v.  Leverich,  70  Iowa,  741.  .30  N.  W.  39;  August  v. 
Fourth  Nat.  Bank.  48  Hun,  620,  1  N.  Y.  Supp.  139.  See  "Banlcs  and 
Banking."  Dec.  Dig.  (Key  No.)  §  15/,;   Cent.  Dig.  §§  518-521. 

-  8  f- Alters  V.  Commercial  Bank,  85  Mo.  173,  55  Am.  Rep.  355.  Cf. 
Brandt  v.  Public  Bank,  139  App.  Div.  173,  123  N.  Y.  Supp.  807.  -See 
•'Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  15.',;  Cent.  Dig.  §§  518- 
521. 

286  Egbert  v,  Payne,  99  Pa.  239;  ante,  p.  43.  -See  ''Banks  and 
Banking."  Dec.  Dig.  (Key  No.)  §  15.',;  Cent.  Dig.  §§  518-521. 

287  Patterson  v.  Marine  Nat.  Bank,  130  Pa.  419,  18  Atl.  632,  17  Am. 
St.  Rej).  778.  .See  "Banks  and  Baulking,"  Dec.  Dig.  (Key  No.)  §  15.',; 
Cent.  Dig.  §§  518-521. 

288  Detroit  Savings  Bank  v.  Haines,  128  Mich.  38,  87  N.  W.  06. 
-See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  154;  Cent.  Dig.  §§ 
518-521. 


96  CHECKS  (Ch.  3 

CHAPTER  III 

CHECKS 

30.  Definition. 

31.  Liability  of  Drawer  to  HoKlor — In  GeneraL 

32.  Presentment  ana  Notice  ot  Dishonor. 

33.  Reasonable  Time  for  Presentment. 

34.  Negotiability  and  Transfer — In  General. 

35.  Liability  of  Indorser. 

36.  Holder  in  Due  Course. 

37.  Liability  of  Drawee  to  Holder. 

38.  Certified  Checks— Liability  of  Bank. 

39.  Liability  of  Drawer  and  Indorsers. 

CHECKS 

30.  DEFINITION — A  check  is  an  unconditional  order  in 
writing,  addressed  to  a  bank  or  banker,  signed  by 
the  person  giving  it,  requiring  the  bank  or  bank- 
er to  pay  on  demand  a  sum  certain  in  money  to  a 
designated  person,  or  to  order,  or  to  bearer.  In 
other  words,  a  check  is  an  instrument  in  the  form 
of  a  bill  of  exchange,  drawn  on  a  bank  or  banker, 
and  payable  on  demand. 

In  General 

It  is  by  the  means  of  checks  drawn  upon  his  bank  that  a 
depositor  usually  obtains  payment  of  his  funds  on  deposit. 
In  form  a  check  is  a  bill  of  exchange,  and  it  is  distinguish- 
able from  other  bills  of  exchange  only  in  being  "(1)  drawn  upon 
a  bank,  and  (2)  payable  on  demand.^    Ordinarily  the  name  of 

1  Whistler  v.  Forster,  14  C.  B.  (N.  S.)  248;  McLean  v.  Clydesdale 
Banking  Co.,  9  App.  Cas.  95 ;  Bowen  v.  Needles  Nat.  Bank  (C.  C.) 
87  Fed.  430;  Garthwaite  v.  Bank  of  Tulare,  134  Cal.  237,  66  Pae. 
326;  Farmers'  Bank  of  Nashville  v.  Johnson,  King  &  Co.,  134  Ga. 
486,  68  S.  E.  85,  30  L.  R.  A.  (N.  S.)  697,  137  Am.  St.  Rep.  242 ;    Lester 


§  30)  DEFINITION  97 

the  bank  appears  at  the  top  of  the  instrument,  immerliately 
after  the  date,  instead  of  at  the  end  of  the  instrument,  preceded 
by  the  word  "To,"  as  in  the  case  of  bills  of  exchange.  The 
word  "demand"  is  not  used;  but  the  order,  which  is  a  mere 
order  to  pay,  without  designation  of  the  time  of  payment,  is 
in  legal  effect  an  order  to  pay  on  demand. 

It  is  often  said,  or  within  the  terms  of  some  statute  held, 
that  a  check  is  a  bill  of-  exchange,-  although  it  is,  of  course, 
always  conceded  that  a  check  has  many  peculiar  incidents,  and 
that  all  the  rules  governing  a  bill  of  exchange  are  not  ap- 
plicable to  a  check.  A  check  is  defined  by  the  Negotiable 
Instruments  Law  as  "a  bill  of  exchange  drawn  on  a  bank  paya- 
ble on  demand,"  and  the  same  section  adds :  "Except  as 
"herein  otherwise  provided,  the  provisions  of  this  act  applica- 
ble to  a,  bill  of  exchange  payable  on  demand  apply  to  a  check."  ^ 
This  is  well  enough,  but  the  exceptions  are  of  so  great  im- 
portance that  it  is  not  improper  to  describe  a  check  as  a  dis- 
tinct commercial  instrument.* 

V.  Given.  S  Bush  (Ky.)  357:  \yeiand's  Adm'r  v.  State  Nat.  Bank  of 
Maysville.  112  Ky.  310.  6.5  S.  W.  017,  56  L.  R.  A.  178;  Exchange 
Bank  of  Wheeluig  v.  Sutton  Bank,  7S  Md.  577,  28  Atl.  563.  23  L. 
R.  A.  173 ;  Bowen  v.  Newell,  8  N.  Y.  190 ;  Hohart  Nat.  Bank  v.  Mc- 
Murrough,  24  Okl.  210,  103  Pac.  601.  See,  also,  cases  post,  notes  16 
10.  See  "nnis.  and  i'otes"  Dec.  Dig.  (Key  No.)  §  15;  Cent.  Dig 
§§  20,  21. 

2  Rogers  v.  Durant,  140  U.  S.  208.  11  Sup.  Ct.  754,  35  L.  Ed.  481 
Garrettson  v.  North  Atchison  Bank  (C.  C.)  47  Fed.  867 :  First  Nat 
Bank  of  Montgomery  v.  Nelson,  105  Ala.  180,  10  South.  707;  Laird 
V.  State,  61  Md.  309;  People  v.  Kemp.  76  Mich.  410,  43  N.  W.  439 
German  Nat.  Bank  of  Beatrice  v.  Beatrice  Nat.  Bank,  63  Neh.  240 
SS  N.  W.  480.  See  "Bills  and  Notes."  Dec.  Dig.  (Keg  No.)  §§  1,  1.5; 
Cent.  Dig.  §§  1,  20,  21. 

3  Negotiable  Instruments  Law,  §  185. 

4  Keene  v.  Beard,  8  C.  B.  (N.  S.)  380 ;  Hopkinson  v.  Forster,  L.  R. 
19  Eq.  76;  Mullick  v.  Radakissen,  9  Moore  P.  C.  69;  Merchants'  Nat. 
Bank  v.  State  Nat.  Bank.  10  Wall.  647.  19  L.  Ed.  10a8 ;  Bullard  v. 
Randall.  1  Gray  (Mass.)  60.5,  609,  61  Am.  Dec.  433;  Blair  v.  Wilson. 
69  Va.  170.  See  "Bills  and  Notes,"  Dec.  Dig.  {Keg  No.)  §§  1,  15; 
Cent.  Dig.  §§  1,  20,  21. 

Tiff.Bks.&  B. — 7 


98  CHECKS  (Ch.  3 

The  principal  differences  between  a  check  and  a  demand 
bill  of  exchange  are  in  respect  to  the  rules  governing  (1) 
the  liability  of  the  drawer,  who  is  chargeable,  notwithstand- 
ing delay  in  presentment  of  the  check  unless  he  has  actually 
been  prejudiced  by  the  delay,^  and  (2)  the  rights  of  the  par- 
ties upon  certification.^  In  some  jurisdictions  the  rule  has 
prevailed  that  a  check  is  an  assignment  pro  tanto  of  the 
drawer's  funds,  and  confers  a  right  of  action  upon  the  holder 
against  the  drawee  upon  the  refusal,  if  in.  funds,  to  pay  the 
check ;  "^  but  since  the  general  enactment  of  the  Negotiable 
Instruments  Law  there  are  few  jurisdictions,  if  there  are 
any,  where  this  rule  survives.**  Among  the  distinguishing  char- 
acteristics of  checks,  as  contradistinguished  from  bills  of  ex- 
change, are  sometimes  enumerated,  also,  the  features  thaf 
they  are  payable  immediately  on  presentment,  without  allow- 
ance of  any  days  of  grace,  and  that  they  are  never  presentable 
for  acceptance,  but  only  for  payment ;  ®  but  these  features  they 
have  in  common  with  demand  bills  of  exchange. 

Bank  or  Banker 

To  be  a  check,  the  order  must  be  drawn  on  a  bank  or 
banker.^"  If  drawn  on  any  other  person,  the  instrument  is 
a  bill  of  exchange,  and  not  a  check."  It  seems  that  it  need 
not  appear  on  the  face  of  the  instrument  that  the  drawee  is 
a  bank,^^  but  it  is  safer  that  this  should  appear;  for  it  seems 
that  otherwise  a  bona  fide  holder  without  knowledge  that  it 

5  Post,  p.  107.  ^  Tost,  p.  127. 

6  Post  p.  131.  8  Post,  p.  130. 

»  See  In  re  Brown,  2  Story,  502,  Fed.  Cas.  No.  1,985.  See  "BilU 
and  Notes,"  Dec.  Dig.  {Key  No.)  §§  1,  15;   Cent.  Dig.  §§  1,  20,  21. 

10  See  oases  ante,  note  1 ;  post,  note  19.  Contra  :  Industrial  Bank 
of  Chicago  v.  Bowes,  105  111.  70,  46  X.  E.  10,  56  Am.  St.  Rep.  22S 
See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  3;  Cent.  Dig.  §§  lJf-18. 

11  Amsinck  v.  Rogers,  189  N.  T.  252.  82  N.  E.  134.  12  L.  R.  A. 
(N.  S.)  875,  121  Am.  St.  Rep.  858  (althoiigb  styled  a  check  on  its  face). 
See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  3;  Cent.  Dig.  §§  U-18. 

12  See  Planters'  Bank  v.  Keesee,  7  Heisk.  (Tenn.)  200.  See  "Bills 
and  Notes,"  Dec.  Dig.  (Key  No.)  §  3;  Cent.  Dig.  §§  14-18. 


§  30)  DEFINITION  99 

is  drawn  on  a  bank  may  treat  it  as  a  bill  of  excharn^  On 
the  other  hand,  it  seems  that  the  mere  designation  of  the  drawee 
as  a  bank,  if  the  drawee  is  not  in  fact  such,  does  not  make  the 
instrument  a  check.  An  instrument  purporting  to  be  drawn 
on  a  bank,  when  the  bank  had  gone  into  liquidation,  has  been 
held  not  to  be  a  check.  ^^ 

Foreign  Bank 

Whether  an  instrument,  otherwise  in  the  form  of  a  check, 
drawn  upon  a  bank  in  another  state  or  county  in  the  form  in 
which  drafts  are  commonly  made  by  banks  for  the  ])urpose  of 
remitting  money,  is  a  check  or  a  bill  of  exchange,  has  been 
questioned.  Although  there  are  decisions  to  the  contrary,^* 
it  is  almost  universally  held  that  such  instruments  are  checks.^' 

Payable  on  Demand 

Whether  an  instrument  which  is  otherwise  in  the  form  of  a 
check,  but  is  by  its  terms  drawn  payable  on  a  day  subsequent 
to  its  date,  is  such,  is  a  question  on  which  there  has  been, 
much  controversy.  It  is  conceded  that  a  check  is  not  enti- 
tled to  days  of  grace, ^^  while  a  bill  of  exchange  payable  at 
n  future  date  is  entitled  to  grace  in  jurisdictions  where  grace 
has  not  been  abolished  by  statute.    Consequently,  in  determin- 

'•■t  Harmanson  v.  Bain,  1  Iluphes,  188,  Fed.  Cas.  No.  G.072.  See 
■liiUs  and  ^otes,"  Dec.  Dig.  (Key  j\'o.)  §§  3,  6;  Cent.  Dip.  §§  7,  8, 
I ',-18. 

i-tGrammel  v.  Carmer.  55  Mich.  201.  21  N.  W.  418.  54  Am.  Rep. 
.".tB  (si'inhle).  See,  also,  La  Due  v.  First  Nat.'  Bank  of  Kasson,  31 
Miuu.  33,  16  N.  W.  426.  See  "Bills  and  Xotes,"  Dec.  Di(j.  (Key  No.) 
§§  i,  13,  15;   Cent.  Dig.  §§  1,  20,  21,  2S. 

15  Bull  V.  First  Nat.  Bank,  123  U.  S.  105,  8  Sup.  Ct.  62,-  31  L. 
Ed.  97;  First  Nat.  Bank  v.  Coates  (C.  C.)  S  Fed.  .540;  Boweu  v. 
Needles  Nat.  Bank  (C.  C.)  87  Fed.  430 ;  Merchants'  Nat.  Bank  v.  Rit- 
zinger.  118  111.  484,  8  N.  E.  834;  Harrison  v.  Wright.  100  Ind.  515, 
.j8  Am.  Rep.  805.  See  ''Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §§  1, 
13,  15;    Cent.  Dig.  §§  1,  20,  21,  2S. 

10  Wood  River  Bank  v.  First  Nat.  P-ank.  36  Neh.  744.  55  N.  W.  239. 
See  cases  ante,  note  15;  post,  note  17.  Sec  "Bills  and  Notes"  Dec. 
Dig.  (Key  No.)  §  130;    Cent.  Dig.  §§  207-309. 


100  CHECKS  (Ch.  3 

ing-  whether  a  draft  upon  a  bank  payable  at  a  future  day  is  enti- 
tled to  grace,  it  has  frequently  been  deemed  necessary  to  decide 
the  question  whether  or  not  it  is  a  check.  In  some  cases  the 
affirmative  has  been  held ;  ^^  but  by  the  great  weight  of  au- 
thority such  instruments  have  been  held  to  be  bills  of  exchange, 
and  not  checks,  and  hence  entitled  to  grace. ^*  The  prevailing 
rule  that  they  are  not  checks  is  probably  in  accord  with  the 
practice  of  bankers  and  business  usage,  and  it  has  been  adopted 
by  the  Negotiable  Instruments  Law,  which  incorporates  in 
its  definition  of  a  check  the  requirement  that  it  be  "payable 
on  demand."  ^* 

Memorandum  Checks 

Where  the  word  "memorandum"  or  "memo"  is  written  across 
the  face  of  a  check,  it  is  called  a  memorandum  check.  A 
memorandum  check  is  understood  by  custom,  where  such 
checks  are  used,  to  be  payable  by  the  drawer  absolutely,  with- 
out demand  on  the  bank  or  notice  of  dishonor.^"  The  efifect 
is  the  same  as  if  the  words  "presentment  waived"  were  used. 
In  other  respects  a  memorandum  check  is  like  an  ordinary 
check,  and  it  is  the  duty  of  the  bank,  as  against  the  drawer, 
to  pay  it  on  presentment  as  in  the  case  of  an  ordinary  check. -^ 

1 7  lo  re  Brown.  2  Story,  502,  Fed.  Cas.  No.  1.9S5 ;  Way  v.  Towle, 
155  Mass.  374,  29  N.  E.  500,  31  Am.  St.  Rep.  552 ;  Champion  v.  Gor- 
don, 70  Pa.  475,  10  Am.  Rep.  6S1 ;  Westminster  Bank  v.  Wheaton,  4 
R.  I.  30.  See  "Bills  and  Xotes,"  Dec.  Dig.  (Key  To.)  §  130;  Cent. 
Dig.  §§  297-309. 

IS  Minturn  v.  Fisher,  4  Cal.  35;  Bradley  v.  Delaplaine,  5  Har. 
(Del.)  305 ;  Georgia  Nat.  Bank  v.  Henderson,  46  Ga.  487,  12  Am.  Rep. 
590 ;  Culter  v.  Reynolds,  64  111.  321 ;  Harrison  v.  Nicollet  Nat.  Bank 
of  Minneapolis,  41  Minn.  488,  43  N.  W.  336,  5  L.  R.  A.  746,  16  Am. 
St.  Rep.  718;  Ivory  v.  Bank  of  Missouri,  36  Mo.  475,  88  Am.  Dec. 
150;  Bowen  v.  Newell,  8  N.  T.  190;  Woodruff  v.  Merchants'  Bank 
of  City  of  New  York,  25  Wend.  (N.  T.)  G7."i ;  Morrison  v.  Bailey.  5 
Ohio-  St.  13,  64  Am.  'Dec.  632 ;  Hawley  v.  Jette,  10  Or.  31.  45  Am. 
Rep.  129 ;  Brown  v.  Lusk,  4  Yerg.  (Tenn.)  210.  See  ''Bills  and  Notes," 
Dec.  Dig.  (Key  No.)  §  130;   Cent.  Dig.  §§  291-309. 

19  Negotiable  Instruments  Law,  §  185. 

2  0  Post,  p.  107. 

21  Franklin  Bank  v.  Freeman.  16  Pick.   (Mass.l   535;    Cnshing  v. 


§  30)  DEFINITION  101 

Other  formal  Requisites 

Except  in  respect  to  tlic  requirements  that  a  check  must  be 
drawn  on  a  bank  and  payable  on  demand,  the  formal  requisites 
of  a  check  are  the  same  as  those  of  a  bill  of  exchange."-  In 
other  words,  it  must  contain  an  unconditional  order  for  the 
•payment  of  a  certain  sum  of  money  only  ;  it  must  be  specific 
as  to  all  its  parties,  and  must  be  signed ;  ^^  and  it  must  be 
delivered.-* 

Date 

A  date  is  not  necessary  to  the  validity  of  a  bill  of  exchange 
or  a  promissory  note."  If  an  instrument  is  not  dated,  it  will 
be  considered  as  dated  as  of  the  time  it  was  issued."*^  It  has 
been  suggested  that  an  undated  check  is  never  payable,-^  but 
this  may  be  doubted.-®  Certainly  it  cannot  hold  true  under 
the  Negotiable  Instruments  Law.  which  provides  that  the 
validity  and  negotiable  character  of  a  bill  or  note  is  not  af- 
fected by  the  fact  that  it  is  not  dated,  andi  makes  this  rule 
applicable  also  to  checks.-"  It  seems,  however,  that  in  order 
to  render  the  bank  liable  to  the  drawer  for  failure  to  pay  a 
check,  and  to  protect  the  bank  in  paying  it,  should  it  for  any 
reason  turn  out  to  be  subject  to  defenses  as  between  the  drawer 
and  holder,   it   should  be  dated;    for  the  absence  of  a  date 

Gore,  15  Mass.  69;  Turnbull  v.  Osborne,  12  Abb.  Prac.  N.  S.  (X.  Y.) 
200.  See,  also,  Kelley  v.  Brown,  5  Gray  (Mass.)  108;  Skillman  v. 
Titus,  32  N.  J.  Law,  96;  Dykers  v.  Leather  Mfg.'s  Bank.  11  Paige 
(N.  Y.)  612.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  395;  Cent. 
Dig.  §§  996-1021. 

22  See  Negotiable  Instruments  Law,  §  185. 

23  See  Negotiable  Instrnnients  Law,  §  12G. 

24  See  Negotiable  Instnnnents  Law,  §  16. 
2  0  Norton,  Neg.  Inst.  (3d  Ed.)  72. 

26  See  Negotiable  Instruments  Law,  §  17  (3). 

2  7  Morse,  Banks  &  B.  (4tli  Ed.)  §  368. 

28  See  Gordon  v.  Lansing  State  Savings  Bank,  per  Carpenter,  J., 
133  Mich.  143,  94  N.  W.  741 ;  Crawford  v.  West  Side  Bank.  100  N. 
Y.  50,  2  N.  E.  881,  53  Am.  Rep.  152.  See  "Bills  and  Notes,"  Dec. 
Dig.  (Key  No.)  §§  8,  129;   Cent.  Dig.  §§  4,  283-292. 

2  0  Negotiable  Instruments  Law.  §S  6(]),  185. 


102  CHECKS  (Ch.  3 

would  properly  put  the  bank  upon  inquiry  as  to  how  long  the 
check  had  been  outstanding.^"  If  a  blank  be  left  for  the  date, 
any  legal  holder  may  fill  in  the  true  date,  and  a  holder  in  due 
course  rnay  enforce  it  as  if  the  date  had  been  correctly 
filled  in.^i 

A  check  may  be  antedated,  in  which  case  it  is  payable 
immediately.^-  And  notwithstanding  that  an  instrument  in 
the  form  of  a  check  is  not  such  if  it  is  payable  on  a  day  sub- 
sequent to  its  date,  a  check  may  be  postdated.^''  A  postdated! 
check  is  payable  on  demand  at  or  after  its  date,^*  and -is  not 
irregular,  so  as  to  charge  the  holder  with  notice  of  equities.^ ^ 

Designation^  of  Payee 

A  check  may  order  payment  to  a  person  named  in  it,^^  or 
to  him  or  his  order, ^'  or  to  him  or  bearer,  or  simply  to  bearer.^^ 
Failure  to  designate  a  payee,  or  to  designate  him  with  suf- 
ficient   certainty,    will    render   the    writing    inoperative    as    a 

3  0  Post,  p.  151. 

31  See  Negotiable  Instruments  Law,  §  14.  Under  section  13,  it. 
seems  that  ttie  right  to  insert  the  true  date  of  issue,  if  no  blank  be 
left  therefor,  is  not  given  to  the  holder  of  a  check. 

3  2  See  Negotiable  Instruments  Law,  §  12. 

3  3  Burns  v.  Kahn,  47  Mo.  App.  215 ;  Symonds  v.  Riley,  188  Mass. 
470,  74  N.  E.  926;  Royal  Bank  v.  Tottenham,  [1894]  2  Q.  B.  715. 
See  Negotiable  Instruments  Law,  §  12.  See  "Bills  and  Notes,'' -Dec. 
Dig.  {Key  No.)  §  8;  Cent.  Dig.  §  -J. 

3  4  Salter  v.  Burt,  20  Wend.  (N.  Y.)  205,  32  Am.  Dec.  530.  See 
"Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §§  129,  130;  Cent.  Dig.  §§  288, 
298-302. 

3  5  Hitchcock  V.  Edwal-ds,  60  L.  T.  Rep.  636.  See  "Bills  and  Notes," 
Dec.  Dig.  (Key  No.)  §  S42j   Cent.  Dig.  §  832. 

36  "I  conceive  it  to  be  still  a  check,  *  *  *  although  payable 
to  a  particular  party  only  by  name."  Per  Story,  J.,  In  re  Brown, 
2  Story,  502,  Fed.  Cas.  No.  1,985.  See  "Bills  and  Notes,"  Dec.  Dig. 
{Key  No.)  §  6j   Cent.  Dig.  §§  7,  S,  20,  21. 

3  7  See  Charles  v.  Blackwell,  2  C.  P.  D.  156;  Eyre  v.  Walker,  5  H. 
&  N.  laS  ;  In  re  Brown,  2  Story,  502.  Fed.  Cas.  No.  1,985 ;  Bowen 
V.  Newell,  8  N.  Y.  190.  See  -Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  § 
6;   Cent.  Dig.  §§  7,  S,  20,  21. 

38  Some  of  the  earlier  cases  declared  that  a  check  must  be  pay- 


§  30)  DEFINITION  103 

check. •''°  A  check  payable  to  a  person  named  in  it,  without 
words  of  negotiability,  is  not  negotiable.*"  But  where  a  check 
is  delivered  with  the  name  of  the  payee  left  blank,  the  person 
to  whom  it  is  delivered  may  insert  his  own  name  as  payee." 
A  check  may  be  to  the  order  of  a  fictitious  or  nonexisting  per- 
son, provided,  at  least,  the  fact  that  he  is  fictitious  or  non- 
existent be  known  to  the  drawer,  in  which  case  the  check  is 
generally  held  to  be  payable  to  bearer,  and  transferable  by 
delivery.'*^  A  check  may  also  be  so  drawn  that  the  name  of 
the  payee  does  not  purport  to  be  the  name  of  any  person,  as 
to  the  order  of  "Bills  Payable,"  "Rent,"  "1658."  "Cash,"  and 
other  words  indicating  the  purpose  to  which  it  is  to  be  api)lied, 
in  which  case  the  instrument  is  deemed  to  be  payable  to 
bearer.*^ 

nlile  to  bearer.  See  Woodruff  v.  Merchnnts'  Bank  of  City  of  New- 
York,  25  Wend.  (N.  Y.)  073.  Cf.  Charles  v.  Blackwell,  2  C.  P.  D. 
15G.  Sec  '•Bills  and  Xoics"  Dec.  Did.  (Kcij  Ao.)  §  6;  Cent.  Din.  §§ 
7,  8. 

3  6  See  Reed  v.  Mattapan  Deposit  &  Trust  Co.,  198  :Mass.  306,  84 
N.  E.  4G9. 

A  -.vrit-ing  addressed  to  a  hank  :  '  Tay  to  the  order  of,  on  sight, 
$200"  is  not  a  check,  because  no  payee  is  indicated.  Mcintosh  v. 
Lytle,  2<;  Minn.  33C,  3  X.  W.  083.  37  Am.  Rep.  410.  See,  also,  Gordon 
V.  Lansing  State  Sav.  Bank.  133  .Mich.  143,  94  N.  W.  741.  Cf.  Davega 
V.  Moore,  3  McCord  (S.  C.)  482.  See  post,  note  43.  Sec  "Bills  and 
Notes,"  Dec.  Difj.  {Key  No.)  §§  6,  153;    Cent.  Dig.  §§  7,  389. 

*«  See  Mechanics'  Bank  of  New  York  v.  Straiten,  *42  N.  Y.  3G5 ; 
Negotiable  Instruments  Law,  §§  1  (4),  12G,  185.  See  ''Bills  and  Notes," 
Dec.  Dig.  {Key  No.)  §  l-M ;   Cent.  Dig.  §  363. 

41  People  V.  Gorham,  9  Cal.  App.  341,  90  Pac.  391.  See,  also,  Mc- 
intosh V.  Lytle.  2G  >Iinn.  33G,  3  N.  W.  083.  37  Am.  Re]t.  410j  Nego- 
tiable Instruments  Law,  §  14;  Norton,  Bills  k  N.  (3d  Ed.)  258.  See 
"Bills  and  Notes,"  Dec.  Dig.  [Key  No.)  §  m ;    Cent.  Dig.  §§  6'J-9.}. 

■•2  So  provided  by  Negotiable  Instruments  Law,  §  9  (3).  See  Boles  v. 
Uardiug.  201  Mass.  103,  87  N.  E.  481 ;  Snyder  v.  Corn  Exch.  Nat. 
Bank,  221  Pa.  590,  70  Atl.  87G,  128  Am.  St.  Rej).  780.  See  "Bills  and 
Notes,"  Dec.  Dig.  {Key  No.)  §  6;   Cent.  Dig.  §  S. 

*3  Vere  v.  Lewis,  3  Term  R.  183;  Willets  v.  Phcenix  Bank,  2  Duer 
(N.  Y.)  121  ;  Mechanics'  Bank  of  New  York  v.  Straiton,  *42  N.  Y. 
3G5;    Cleary  v.  De  Beck  Plate  Glass  Co.,  54  Misc.  Rep.  537,  104  N, 


104  CHECKS  ^       (Ch.  3 

Form  of  Order 

The  order  for  payment  must  be  in  its  terms  absolute  and 
unconditional.**  An  order  in  form,  "Pay  L.,  or  order,  $120, 
and  charge  to  my  account  on  book  No.  ,"  and  con- 
taining on  its  face  the  words  "The  bank  book  of  the  depositor 
must  accompany  this  order,"  is  conditional  within  this  rule.*^ 
But  an  order,  "Pay  this,  our  first  check  (second  unpaid)," 
is  not  conditional ;  both  of  the  so-called  "checks"  being  sim- 
ply parts  of  a  set  and  constituting  one  check,  and  payment  of 
either  of  which  is  a  discharge  of  the  check,  after  the  manner 
of  foreign  bills  drawn  in  sets.*" 

A  practice  has  recently  come  into  common  -use  of  drawing 
so-called  voucher  checks — that  is,  checks  in  such  form  that 
the  signature  or  indorsement  of  the  payee  thereon  operates 


Y.  Siipp.  831  (Cash).     See,  also,  Mcintosh  v.  Lytle,  26  Miuu.  33G,  3  N. 
W.  9S3,  37  Am.  St.  Rep.  410;  Negotiable  Instruments  Law,  §  9(4). 

In  Gordon  v.  Lansing  State  Savings  Bank,  133  Mich.   143,  94  X. 
W. '741,  a  writing  addressed  to  a  bank,  "Pay  to  the  order  of 


$970,"  was  held  by  a  divided  court  not  payable  to  bearer,  or  to  an 
impersonal  payee,  but  void  for  want  of  a  payee.  Here  a  line  was 
drawn  through  the  blank  in  the  form  left  for  the  insertion  of  the 
name  of  a  payee,  and  the  rule  applicable  to  filling  a  blank  purposely 
left  did  not  apply ;  but  it  seems  that  the  instrument  might  properly 
have  been  treated  as  payable  to  the  order  of  an  impersonal  payee,  to 
"the  order"  of  a  line,  and  so  payable  to  bearer.  See  Davega  v. 
Moore,  3  McCord  (S.  C.)  482;  17  Harv.  Law  Rev.  199.  See  "Bills 
and  Notes,"  Dec.  Dig.  {Key  Xo.)  §  6;  Cent.  Difj.  §§  7,  8. 

**  See  Negotiable  Instruments  Law,  §  126. 

A  check  may  be  made  payable  through  another  bank.  Farmers' 
Bank  of  Nashville  v.  Johnson,  King  &  Co.,  134  Ga.  4S6,  68  S.  E. 
85,  30  L.  R.  A.  (N.  S.)  697,  137  Am.  St.  Rep.  242.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  Jf/  Cent.  Dig.  §§  22-25. 

4  5  White  v.  Cushing,  88  Me.  339,  34  Atl.  164,  32  L.  R.  A.  590,  51 
Am.  St.  Rep.  402.  See,  also,  Iron  City  Nat.  Bank  v.  McCord,  1.39  Pa. 
52,  21  Atl.  143,  11  L.  R.  A.  559,  23  Am.  St.  Rep.  1(36.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §§  1,  .',,  20;   Cent.  Dig.  §§  1,  22-25. 

46  Merchants'  Nat.  Bank  v.  Ritzinger,  118  111.  484,  8  N.  E.  834. 
See  Negotiable  Instruments  Law,  §§  178-183,  185.  See  "Bills  and 
Notes,"  Dec.  Dig.  {Key  No.)  §  J,;    Cent.  Dig.  §§  22-25. 


§  30)  DEFINITION  105 

as  a  receipt  of  payment  of  the  particular  indebtefhtess  for 
which  the  check  is  issued ;  the  nature  of  the  transaction  cre- 
ating the  indebtedness,  as  such  and  such  goods  sold  or  serv- 
ices rendered,  being  recited  in  the  margin  or  elsewhere  upon 
the  paper.  If  the  order  to  the  bank  to  pay  is  conditional  upon 
the  signing  by  the  payee  of  a  receipt,  it  seems  that  the  order 
is  conditional,  and  that  the  instrument  is  not  a  check.*^  If, 
however,  the  order  is  in  such  terms  that  the  authority  of  the 
bank  to  pay  is  not  made  conditional  upon  the  signature  of  a 
receipt,  the  instrument  is  a  check,  notwithstanding  that  the 
payee  may  voluntarily  affix  his  signature  to  a  writing  that 
operates  as  a  receipt/^ 
Payment  in  Money  Only 

Checks,  like  bills  of  exchange  and  promissory  notes,  must  be 
payable  in  money;  that  is,  legal  tender.""  The  principal  ques- 
tion that  has  arisen  under  this  rule  is  whether  an  instrument 
by  its  terms  payable  in  "currency,"  or  "in  current  funds,"  is 
a  check.  While  some  courts  deny  'his,^"  construing  these 
terms  as  broader  than  mere  legal  tender,  the  preponderance  of 
authority  is  in  favor  of  construing  the  terms  as  equivalent  to 
legal  tender,  and  consequently  in  favor  of  holding  such  in- 
struments to  be  checks."^ 

*'  An  order  to  pay  "provided  the  receipt  form  at  foot  hereof  is 
signed,  stamped,  and  dated"  is  not  unconditional,  and  not  a  cheek. 
Bavins  v.  London  &  S.  W.  Banli  [1900]  1  Q.  B.  270.  See  "Bills  and 
Notes,"  Dec.  Dig.  {Key  No.)  §  4;   Cent.  Dig.  §§  22-25. 

*«  Where  at  the  foot  was  written  "the  receipt  at  the  back  hereof 
must  be  signed,  and  signature  will  be  taken  as  an  indorsement  of 
the  check."  and  on  the  back  was  a  form  of  receipt,  the  words  at 
the  foot  not  being  addressed  to  the  bankers  and  not  affecting  tho 
order,  the  order  to  pay  was  said  to  be  unconditional,  and  the  checic 
negotiable.  Nathans  v.  Ogdens,  21  L.  T.  R.  775.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  //;    Cent.  Dig.  §§  22-25. 

49  See  Negotiable  Instruments  Law,  §  1  (2) — ','sum  certain  in 
money." 

50  Bank  of  Mobile  v.  Brown,  42  Ala.  lOS  (currency);  Dille  v. 
White,  132  Iowa,  327,  109  N.  W.  909  (current  funds).  See  "Bills  and 
Notes,"  Dec.  Dig.  {Key  No.)  §§  11,  162;   Cent.  Dig.  §§  11-13. 

r.i  Bull  V.  First  Nat.  I'.ank.  123  U.  S.  10."),  S  Sup.  Ct.  02,  31  L.  Ed. 


106  CHECKS  (Ch.  3 

Where  the  sum  payable  is  expressed  in  both  words  and 
figures,  the  words  control,  if  there  be  a  discrepancy.  °- 

Where  the  amount  is  left  blank,  the  person  in  possession  has 
prima  facie  authority  to  fill  in  the  blank,  and  a  bona  fide  pur- 
chaser for  value  may  enforce  the  check  for  that  amount,  even 
if  the  blank  was  filled  in  for  an  amount  in  excess  of  the  ac- 
tual authority.  °* 
Signature 

A  check  must,  of  course,  be  signed  by  the  drawer ;  °*  but 
the  place  of  his  signature  is  immaterial,  provided  it  appears 
to  have  been  intended  for  his  signature. ^'^  The  signature  may 
be  in  pencil, ^'^  printed  or  stamped,  and  it  may  he  by  the  draw- 
er's mark;  ^'^  but  in  all  such  cases  it  seems  that  the  bank  would 
be  justified  in  refusing  to  pay  a  check  without  sufficient  evi- 
dence that  the  signature  was  that  of  the  drawer  or  his  duly 
constituted  agent. ^^ 

97;  ante,  p.  78.  See  Norton,  Bills  &  N.  (3d  Ed.)  p.  43.  Negotia- 
ble Instruments  Law,  §  6,  provides  merely  that  "the  validity  and 
negotiable  character  of  an  instrument  are  not  affected  by  the  fact 
that  it  *  *  *  designates  a  particular  kind  of  current  money  in 
which  payment  may  be  made."  See  "Bills  and  Notes,"  Dec.  Dig. 
(Key  No.)  §§  11,  131;    Cent.  Dig.  §§  11-13.  310-315. 

5  2  See  Negotiable  Instruments  Law,  §  17. 

5  3  Under  Negotiable  lustruments  Law,  §  14,  the  blank  must  be 
filled  up  within  a  reasonable  time.  Madden  v.  Gaston,  137  App. 
Div.  294,  121  N.  Y.  Supp.  951.  See,  also,  Rodgers  v.  Baker,  136  App. 
Div.  851,  122  N.  Y.  Supp.  91.  See  "Bills  and  Notes,"  Dec.  Dig.  [Key 
No.)  §  60;   Cent.  Dig.  §§  85-9^. 

5  4  See  Negotiable  Instruments  Law,  §§  18,  126,  185. 

5  3  See  Palmer  v.  Stephens,  1  Denio  (N.  Y.)  471;  Merchants'  Bank 
v.  Spicer,  6  Wend.  (N.  Y.)  443.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key 
No.)  §  5-J;    Cent.  Dig.  §§  72-74- 

5  6  See  Geary  v.  Physic,  5  Barn.  &  C.  234;  Reed  v.  Roark,  14  Tex. 
329,  65  Am.  Dec.  127.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  § 
J-'/;    Cent.  Dig.  §§  72-75. 

5  7  See  Pennington  v.  Baehr,  48  Cal.  565;  Shank  v.  Butseh,  28 
Ind.  19 ;  Commonwealth  v.  Ray,  3  Gray  (Mass.)  441 ;  Brown  v. 
Butchers'  &  Drovers'  Bank,  6  Hill  (N.  Y.)  443,  41  Am.  Dec.  755.  See 
"Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  54;   Cent.  Dig.  §§  72-75. 

■'"^  I'ost,    p.  159. 


I 


§§  31-33)  LIABILITY    OF    DKAWKK    TO    HOLDER  107 

LIABILITY  OF  DRAWER  TO   HOLDER 

31.  IN  GENERAL— The  drawer  engages  that  on  due  pre- 

sentment of  the  check  to  the  drawee  for  payment 
it  will  be  paid,  and  that  if  it  be  dishonored,  and 
due  notice  of  such  dishonor  be  given  to  him,  he 
will  pay  the  amount  to  the  holder. 

32.  PRESENTMENT  AND  NOTICE  OF  DISHONOR— 

A  check  must  be  presented  within  a  reasonable 
time  after  its  issue,  and  due  notice  of  dishonor  must 
be  given,  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by 
the  delay  in  presentment  or  in  giving  notice  or  by 
the  failure  to  give  notice ;  but  the  drawer  will  not 
be  discharged  by  delay  in  presentment,  or,  unless 
it  is  otherwise  provided  by  statute,  by  delay  in  giv- 
ing notice  of  dishonor  or  by  failure  to  give  notice, 
unless  he  has  suffered  loss  thereby.  Presentment 
and  notice  of  dishonor,  and  delay  therein,  are  ex- 
cused, where  the  circumstances  exist  which  would 
operate  as  such  excuse  in  respect  to  a  bill  of  ex- 
change. 

33.  REASONABLE  TIME   FOR  PRESENTMENT— In 

determining  what  is  a  reasonable  time,  regard  must 
be  had  to  the  nature  of  the  instrument,  the  usage 
of  the  trade  or  business,  if  any,  with  respect  to 
such  instruments,  and  the  facts  of  the  particular 
case ;  but  in  the  absence  of  a  different  usage,  or 
of  special  circumstances,  a  check  is  not  deemed 
to  have  been  presented  within  a  reasonable  time, 
unless  it  be  presented  within  the  time  limited  by 
the  following  rules: 
(1)  If  the  payee. or  other  holder  to  whom  it  is  delivered 
and  the  bank  are  in  the  same  place,  it  must  be 
presented  during  business  hours  on  the  next  busi- 
ness day  after  its  receipt. 


108  CHECKS  -  (Ch.  3 

(2)  If  such  payee  or  other  holder  of  the  bank  are  in  dif- 
ferent places,  it  must  be  forwarded  on  the  next 
business  day  after  its  receipt  to  the  place  where 
the  bank  is  located  for  presentment,  and  the  agent 
to  whom  it  is  sent  must  present  it  during  business 
hours  on  the  next  business  day  after  its  receipt 
by  him. 

In  General 

While  a  check  is  in  the  form  of  a  bill  of  exchange,  the  same 
strict  rules  of  diligence  in  respect  to  presentment  and  notice 
of  dishonor  are  not  required  of  the  holder  who  may  seek  to 
charge  the  drawer.  When  a  man  draws  a  check,  he  should 
have  money  in  the  bank  to  meet  it,  and  there  it  ought  to  re- 
main until  called  for  by  the  holder;  and  unless  the  drawer 
actually  suffers  from  the  delay,  as  by  the  intermediate  fail- 
ure of  the  bank,  he  has  no  reason  to  complain  of  delay  on  the 
part  of  the  holder  in  calling  for  the  money.  If,  however,  the 
delay  is  unreasonable,  and  the  drawer  is  prejudiced  thereby,  he 
will  be  discharged  from  his  obligation,  to  the  extent  of  his 
loss,  but  only  to  that  extent.^*^  ''A  check  must  be  presented 
for  payment  within  a  reasonable  time  after  its  issue,  or  the 
drawer  will  be  discharged  from  the  liability  thereon  to  the 
extent  of  the  loss  caused  by  the  delay."  ^'^    Thus,  if  the  holder 

59  Serle  v.  Norton,  2  Moody  &  R.  401 ;  Robinson  v.  Hawksford,  9 
Q.  B.  52;  Bull  v.  First  Xat.  Bank,  123  U.  S.  105,  8  Sup.  Ct.  62, 
31  L.  Ed.  97 ;  In  re  Brown,  2  Story,  502,  Fed.  Cas.  No.  1,985 ;  Bow- 
en  V.  Needles  Nat.  Bank  (C.  C.)  87  Fed.  430 ;  Andrus  v.  Bradley  (C. 
C.)  102  Fed.  54;  Merritt  v.  Gate  City  Nat.  Bank,  100  Ga.  147,  27 
S.  E.  979,  38  L.  R.  A.  749 ;  Brown  v.  Schintz,  203  111.  136,  67  N.  E. 
767 ;  Henshaw  v.  Root,  60  Ind.  220 ;  Gregg  v.  George,  16  Kan.  546 ; 
Morrison  v.  McCartney,  30  Mo.  183;  Cogswell  v.  Rockingham  Ten 
Cents  Savings  Bank,  59  N.  H.  43 ;  Little  v.  Plienix  Bank,  2  Hill  (N. 
Y.)  425;  Id.,  7  Hill  (N.  Y.)  .359;  Cowing  v.  Altnian,  79  N.  Y.  167; 
Martin  v.  Home  Bank,  160  N.  Y.  190,  54  N.  E.  717;  Stewart  v. 
Smith,  17  Ohio  St.  82 ;  Bell  v.  Alexander,  62  Ya.  6 ;  Kinyon  v.  Stan- 
ton, 44  \Vis.  479,  28  Am.  Rep.  601.  See  "Bills  and  Notes,"  Dec.  Dig. 
(Key  No.)  §  W,;    Cent.  Dig.  §§  1091-1103. 

■  "^  See  Negotiable  Instruments  Law,  §  186. 


§§  31-33)  LIABILITY    OF    DIIAWKK   TO    HOLDER  100 

fails  to  present  the  check  within  a  reasonable  time,  and  the 
bank  meanwhile  becomes  insolvent,  so  that  the  drawer  loses 
the  amount  which  he  had  on  deposit  to  meet  the  check,  the 
loss  will  fall  on  the  holder,  and  the  drawer  will  be  discharged. 
If  the  bank  should  pay  the  drawer  50  cents  on  the  dollar,  so 
that  he  would  lose  only  half  the  amount  on  deposit,  he  would 
be  discharged  only  as  to  the  amount  lost."^  If  he  had  no 
money  on  deposit  to  meet  the  check,"  or  had  withdrawn  his 
deposit  before  presentment,^  =*  even  if  the  presentment  had  been 
unreasonably  delayed,  he  would  sufifer  no  loss,  and  would  not 
be  discharged  by  the  delay  at  all.  And  if  the  bank  should 
fail,  when  there  had  then  been  no  unreasonable  delay  in  pre- 
sentment, the  loss  would  fall  on  the  drawer,  and  he  would 
not  be  discharged.** 

Reasonable  Time 

The  general  rule  in  determining  what  is  a  reasonable  time 
is  that  regard  is  to  be  had  to  the  nature  of  the  instrument, 
the  usages  of  trade  or  business,  if  any,  with  respect  to  such 
instruments,  and  the  facts  of  the  particular  case.®^  So  far  as 
concerns  checks,  however,  the  following  rules  have  become 
established  :  (1)  In  the  absence  of  special  circumstances,  where 
the  ])erson  to  whom  the  check  is  issued  and  the  bank  are  in  the 
same  place,  the  time  for  presentment  is  limited  to  the  next 
business  day  after  the  che'ck  is  received ;  ®*   and  (2)  where  the 

«i  Murphy  v.  Uny,  23  Misc.  Rep.  147,  50  N.  Y.  Supp.  682.  See, 
also,  Williams  v.  Browu,  80  App.  Div.  628,  80  N.  Y.  Supp.  247  (set- 
tleurent  by  bank  in  full).  See  "Bills  and  Not  en,"  Dec.  Dig.  (Key  ^o.) 
§  Jf07;    Cent.  Dig.  §§  1110-1112. 

6  2  First  Nat.  Bank  v.  Linn  County  Bank,  30  Or.  296,  47  Pac.  614. 
S'cr  -BilU  and  Notes,"  Dec.  Dig.  (Keij  Xo.)  §  .',07;  Cent.  Dig.  §§  1110- 
1112. 

0  3  Post,  p.  117. 

64  Haggerty  v.  Baldwin,  l.il  Mich.  187,  91  N.  W.  1.50.  See  ''Bills 
and  yotcs,"  Dec.  Dig.  (Key  No.)  §§  J,0.'i.  .',01;  Cent.  Dig.  §§  1091- 
1103.  1110-1112. 

6  5  See  Negotiable  Instruments  Law,  §  193. 

oe  Alexander  v.  Burchfield,  7  Man.  &  G.  1061 ;  Farwell  v.  Curtis. 
7  riss.  16."),  Fed.  Cas.  No.  4,690;    Industrial  Trust.  Title  &  Savintjs 


110  CHECKS  (Ch.  3 

bank  is  at  another  place  than  the  place  where  the  check  is 
received,  it  must  be  forwarded  by  mail  or  other  usual  means 
of  transmission  on  the  next  business  day  after  its  receipt  to 
the  place  where  the  bank  is  located,  and  there  presented  on 
the  next  day  after  its  receipt  at  that  place.®^  These  rules  ap- 
ply under  ordinary  circumstances.  There  may  be  circumstanc- 
es under  which  a  greater  delay  would  not  be  deemed  unrea- 
sonable.^^ For  example,  forwarding  on  the  next  day  after  re- 
ceipt would  be  excused  if  the  only  mail  was  at  an  unreason- 
ably early  hour.^®     Where  the  bank  is  at  a  distant  place,  and 

Co.  V.  Weakley,  103  Ala.  458,  15  South.  ,854.  49  Am.  St.  Rep.  45; 
Burns  v.  Tocum,  81  Ark.  127,  QS  S.  W.  956;  Bickford  v.  First  Nat. 
Bank  of  Chicago,  42  111.  238,  89  Am.  Dec.  436;  Holmes  v.  Roe,  62 
Mich.  199,  28  N.  W.  864,  4  Am.  St.  Rep.  844;  Anderson  v.  Gill, 
79  Md.  312,  29  Atl.  527,  25  L.  R.  A.  200,  47  Am.  St.  Rep.  402; 
Gordon  t.  Levine,  194  Mass.  418,  SO  N.  E.  505,  10  L.  R.  A.  (N.  S.) 
1153,  120  Am.  St.  Rep.  565  (under  Negotiable  Instruments  Law) ; 
Furber  v.  Dane,  203  Mass.  108.  89  N.  E.  227;  Hamilton  v.  Winona 
Salt  &  Lumber  Co.,  95  Mich.  436,  54  N.  W.  903 ;  Smith  v.  Miller,  43 
N.  T.  171,  3  Am.  Rep.  690;  First  Nat.  Bank  of  Charlotte  v.  Alex- 
ander, 84  N.  C.  30,  39  Am.  Rep.  702 ;  School  District  No.  57  of  Logan 
County  V.  Eager,  19  Okl.  235,  91  Pac.  847;    Matlock  v.  Scheuerman.' 

51  Or.  49,  93  Pac.  823,  17  L.  R.  A.  (N.  S.)  747 ;  National  State  Bank 
V.  Weil,  141  Pa.  457,  21  Atl.  601;  Grange  v.  Reigh,  93  Wis.  552,  67 
N.  W.  1130.  See  ''Bills  and  Xotes,"  Dec.  Dig.  (Key  No.)  §§  JiOJf,  -J07; 
Cent.  Dig.  §§  1091-1103,  lllO-lllii. 

67  Hare  v.  Henty,  30  L.  J.  C.  P.  302;  Prideaux  v.  Criddle,  L.  R. 
4  Q.  B.  455 ;  Hey  wood  v.  Pickering,  L.  R.  9  Q.  B.  428 ;  Northwestern 
Coal  Co.  v.  Bowman,  69  Iowa,  150,  28  N.  W.  496;  Smith  v.  Janes, 
20  Wend.  (N.  Y.)  192,  32  Am.  Dec.  527.  See,  also,  cases,  note  66,  su- 
pra, and  note  70,  post.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.) 
§§  J/O-'j,   'fOl;    Cent.  Dig.  §§  1091-1103,  1110-1112. 

0  8  Firth  V.  Brooks,  4  Law  T.  N.  S.  467;  Freiberg  v.  Cody,  55 
Mich.  108,  20  N.  W.  813;  Holmes  v.  Roe,  02  Mich.  199,  28  N.  W. 
864,  4  Am.  St.  Rep.  844  (assent  of  drawer) ;  Cox  v.  Boone,  8  W.  Ya. 
500,  23  Am.  Rep.  627.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  § 
m;   Cent.  Dig.  §§  1091-1103. 

«9  Lewis,  Hubbard  &  Co.  v.  Montgomery  Supply  Co.,  59  W.  Ya.  75, 

52  S.  E.  1017,  4  L.  R.  A.  (N.  S.)  132.  See  "Bills  and  Notes,"  Dec. 
Dig.  (Key  No.)  §  m;   Cent.  Dig.  §§  1091-1103. 


§8  31-33)  LIABILITT    OF    UKAWEU   TO    HOLDER  HI 

the  check  is  sent  on  the  next  day  after  its  receipt,  1jut  in  a 
roundabout  way,  so  that  it  is  presented  on  a  day  later  than  it 
would  have  been  if  sent  direct,  this,  it  is  generally  held,  is  un- 
reasonable delay,  as  where  the  check  is  deposited  for  collec- 
tion in  the  holder's  bank,  which  forwards  it  through  a  cor- 
respondent in  another  place.'"  But,  provided  the  check  is 
presented  not  later  than  had  it  been  sent  direct  on  the  day 
after  its  receipt,  the  fact  that  it  followed  a  roundabout  course 
is  immaterial. ^^ 

Checks  drawn  by  banks  on  banks  in  other  places,  commonly 
called  "bank  drafts,"  as  distinguished  from  mere  local  checks, 
are  often  issued  for  future  use,  and  in  such  cases,  in  determin- 
ing what  is  a  reasonable  time  for  presentment,  having  regard 
to  the  nature  of  the  instrument  and  the  facts  of  the  particular 
case,  presentment  may  be  within  a  reasonable  time,  although 
the  check  was  not  sent  immediately  for  presentment. '^^ 

70  Moule  V.  Brown,  4  Ring.  N.  C.  2(]fj ;  Watt  v.  Gans,  114  Ala.  2G4. 
21  South.  1011,  69  Am.  St.  Rep.  99 ;  Pelt  v.  Maiiar  (Ark.)  128  S.  W. 
n.".4;  First  Xat.  Rank  of  Wymore  v.  Miller,  37  Neb.  500,  55  N.  W. 
1004.  40  Am.  St.  Rep.  499;  Id.,  43  Neb.  791.  62  N.  W.  195;  Wil- 
liams V.  Rrown,  53  App.  Div.  480,  65  N.  Y.  Supp.  1049;  Gregg  v. 
Reane.  69  Vt.  22,  37  Atl.  248;  Gifford  v.  Ilardell,  88  Wis.  5.3S,  60  N. 
W.  1064,  43  Am.  St.  Rep.  925. 

In  Plover  Savings  Bank  v.  Moodie,  135  Iowa,  685,  110  N.  W.  29. 
113  N.  'W.  476,  it  was  held  sufficient  diligence  to  hold  an  indorser 
if  the  check  was  forwarded  through  various  banks  for  collection  in 
accordance  with  the  regular  usage  of  business,  although  present- 
ment might  have  been  more  prompt  had  a  direct  course  been  taken. 
Sec  -liills  and  Xotcs,"  Dec.  Dig.  {Key  A'o.)  §  J,OJ,;  Cent.  DUj.  §§  1091- 
1103. 

Ti  First  Nat.  Rank  of  Grafton  v.  Ruckhannon  Rank,  80  Md.  475,  31 
Atl.  302.  27  L.  R.  A.  332.  See  "BiUs  and  Xoies,"  Dec.  Dig.  {Key  No.) 
§  m ;  Cent.  Dig.  §§  1091-1103. 

7  2  West  Rrauch  State  Rank  v.  Haines,  135  Iowa,  313,  112  N,  W. 
.552;  Angaletos  v.  Meridian  Nat.  Rank,  4  Ind.  App.  573,  31  N.  E. 
368 ;  Marbourg  v.  Rrinkman,  23  Mo.  App.  511 ;  Nutting  v.  Rurked, 
48  Mich.  241,  12  N.  W.  184;  National  Newark  Banking  Co.  v.  Sec- 
ond Nat.  Bank  of  Erie,  63  Pa.  404.  See  "Bills  and  Notes."  Dec.  Dig. 
{Key  No.)  §  m;   Cent.  Dig.  §§  1091-1103. 


112  CHECKS  (Ch.  3 

Whether  the  limit  of  reasonable  time  may  be  extended  for 
a  day  by  presentment  through  the  clearing  house  is  a  ques- 
tion on  which  the  cases  conflict.  According  to  business  usages 
to-day,  a  man  deposits  in  his  own  bank  for  collection  all 
checks  drawn  on  other  banks,  and  these  checks,  if  upon  other 
banks  in  the  same  place,  are  presented  on  the  day  after  their 
deposit  through  the  clearing  house,  with  the  result  that,  if  a 
check  is  received  too  late  to  be  deposited  on  the  day  of  its 
receipt,  it  is  not  deposited  until  the  next  day,  and  consequently 
is  not  presented  until  the  second  day  after  its  receipt.  It  has 
been  held  in  some  jurisdictions  that  such  presentment  is  not 
within  a  reasonable  time; ""'  but  in  others,  having  due  regard 
for  business  usage,  it  is  properly  held  that  such  presentment  is 
within  the  rule  of  reasonable  diligence.''* 

Since  a  check  must  be  presented  within  a  reasonable  time 
after  its  issue,  the  time  will  not  be  extended  by  its  transfer 
to  successive  holders.'''^  This  is  true,  also,  under  the  Negotia- 
ble Instruments  Law,^''  although  thereunder  the  time  for  pre- 
sentment is  extended  by  the  transfer  of  the  check  as  against 
an  indorser.'^^ 

While  the  drawer  of  a  check  is  not  discharged  by  unreason- 
able delay  in  presentment,  unless  he  be  prejudiced,  it  is  un- 

7  8  Edniisten  v.  Henry  HerpoLsheimer  Co.,  OG  Neb.  04,  92  N.  W.  138, 
.59  L.  R.  A.  9.34.  See,  also,  Holmes  v.  Roe,  62  Mich.  199,  28  N.  W. 
804,  4  Am.  St.  Rep.  844;  Rosenblatt  v.  Haberman,  8  Mo.  App.  48fJ. 
fiee  "Bills  and  Xotes,"  Dec.  DUj.  (Key  .Yo.j  §  W,;  Cent.  Dig.  §§  lODl- 
1103. 

74Zaloom  V.  Ganim,  72  Misc.  Rep.  ?>(\,  120  X.  Y.  Supp.  85;  Loux 
V.  Fox,  171,  Pa.  eS,  33  Atl.  190;  Willis  v.  Finloy,  173  Pa.  28,  34 
Atl.  213.  See  ^'Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  J,Oi;  Cent. 
Diff.   §§  1091-1103.  . 

7  5  Davis  V.  Benton,  2  Ohio  Dec.  329.  See  "Bills  and  Notes,"  Dec. 
Dig.  (Key  No.)  §  hO.'r,    Cent.  Dig.  §§  1091-1103. 

7  6  Gordon  v.  Levine,  194  Mass.  418,  80  N.  E.  .50.o,  10  L.  R.  A.  (X. 
S.)  ll."33,  120  Am.  St.  Rep.  i3G.j ;  Dehonst  v.  Lewis,  128  App.  Div.  131, 
112  N,  Y.  Supp.  i5.o9.  See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  § 
J,OJ,;  Cent.  Dig.  §§  1091-1103. 

7  7  Post,  p.  12.'j. 


§§  31-33)  LIABILITY    OF    DKAWEU    TO    IIOLUEK  113 

bafe  lo  delay  prcscnimcnt.  not  merely  because  loss  roaj-'  thus 
discharge  the  drawer,  but  because  a  check  which  has  been  long 
outstanding  is  looked  upon  with  suspicion,  for  checks  are  not 
intendeil  to  remain  long  in  circulation.'^  The  fact  that  a  check 
is*  stale  when  presented  is  sufticient,  it  seems,  to  put  the  bank 
on  inquiry,  so  that,  if  it  pays  it  without  inquiry,  it  does  so  at 
its  peril  in  case  the  drawer  has  any  defense  which  he  could  as- 
sert against  the  holder.'"  The  holder  thus  takes  the  risk  of 
a  refusal  by  the  bank  to  honor  the  check. 

rrcscntinoit — Hoxc  Made 

Presentment  should  be  made  at  the  bank  during  business 
hours  by  some  person  or  holder  authorized  to  receive  paymeni 
in  his  behalf.''"  It  has  been  held  in  some  cases,  however,  that 
presentment  may  be  sufficient  if  the  check  is  mailed  by  a 
collecting  bank  directly  to  the  drawee,  and  that  the  indorsers. 
and  a  fortiori  the  drawer,  are  not  discharged  by  the  fact  that 
I)resentment  is  made  in  that  way,  if  they  are  not  thereby  prej- 
udiced.''' In  some  cases  such  prcsenimont  has  been  held  suffi- 
cient on  the  ground  of  an  establishetl  usage  among  banks. **■ 
In  some  cases  such  presentment  is  said  to  be  justified,  where 
there  is  no  other  bank  in  good  standing  in. the  place  by  which 

7  8  Post,  II.  i::g.  '»  Post,  p.  151. 

»"  NejjotlaMe  Instnmionts  Law;  §  712.  Soe,  also,  Netrotiable  Instni- 
nient.«<  Law.  §§  To-To. 

>•>  riovor  Saving's  Panic  v.  Mooclle,  lo.".  Iowa,  OSo.  110  N.  W.  20; 
Cltlzons'  Bank  of  Pleasantvillo  v.  First  Nat.  Bank  of  Pleasantville, 
135  Iowa,  005,  113  >r.  W.  4S1,  13  L.  R.  A.  (X.  S.)  303.  Sec  "Bills  ami 
Notisr  Dec.  DUj.  {Key  .Yo.)  §  -'/05;    Cent.  Dip.  §§  106',-1010. 

8  2  Kershaw  v.  Padd,  34  Or.  375,  50  Pac.  402,  44  L.  R.  A.  230.  See. 
also.  Bailey  v.  Bodeuliaui,  10  C.  B.  N.  S.  2SS;  Prideaux  v.  Criddle, 
L.  R.  4  Q.  B.  455 ;  Heywood  v.  Pickering.  L.  R.  9  Q.  B.  42S ;  Farm- 
ers' Bank  iV  Trust  Co.  of  Stanford  v.  Xewland.  07  Ky.  404.  31  S. 
W.  38. 

In  the  aliseni-e  of  instructions,  or  of  evidence  of  usage,  where 
there  was  another  iniblio  atrent  for  collection  in  the  town,  such  pre- 
sentment was  insufiieient.  R.  II.  Ilerron  Co.  v.  Mawby,  5  Cal.  App; 
30,  SO  Pac.  S72.  ince  •'Hills  and  yotes"  Dee.  Dii/.  {Key  Xo.)  §  ^05; 
Cent.  Diij.  §§  lOG-h-WiO.  . 
'I'm-.P.us.&B.— S 


114  CHECKS  (Ch.  3 

presentment  might  be  made.^^  By  sending  the  check  direct 
to  the  drawee,  the  holder  makes  that  bank  his  agent,  and  must, 
as  against  the  drawer  and  indorsers,  suffer  any  loss  resulting 
from  failure  to  present  in  the  regular  manner.^*  If  the  bank 
refuses  to  honor  the  check,  it  is  its  duty  as  the  agent  of  the 
holder  to  give  notice  of  dishonor. ^^  As  between  the  holder 
and  a  collecting  bank,  in  the  absence  of  an  agreement  or  usage 
authorizing  it  to  mail  the  check  to  the  drawee,  the  bank  is 
negligent  if  it  does  so,  and  is  responsible  for  any  loss  re- 
sulting thereby.®^ 

Notice  of  Dishonor — Protest  , 

In  like  manner,  contrary  to  the  rule  governing  bills  of  ex- 
change, the  drawer  of  a  check  is  not  discharged  by  the  delay 
of  the  holder  in  giving  him  notice  of  dishonor,*^  or  even  b\- 
his  failure  to  give  notice,^^  unless  the  drawer  has  been  prej- 

8  3  See  Nldig  v.  National  Bank  of  Brooklyn,  59  How.  Prac.  (X.  Y.) 
10 ;  Western  Wheeled  Scraper  Co.  v.  Sadilek,  50  Neb.  105,  69  N.  W. 
765,  61  Am.  St.  Rep.  550.  See  "Bills  ana  Notes,"  Dec.  Dig.  (Key  No.) 
§  J,05;   Cent.  Dig.  §§  1064-1010. 

8  4  Farwell  v.  Curtis,  7  Biss.  160,  Fed.  Cas.  No.  4,690;  Andersoij 
V.  Rodgers,  53  Kan.  543,  36  Pac.  1067,  27  L.  R.  A.  248;  Wagner  v. 
Crook,  167  Pa.  259,  31  Atl.  576,  46  Am.  St.  Rep.  672. 

If  no  degree  of  diligence  would  have  resulted  in  paj-ment,  the 
laches,  if  any,  of  the  payee  In  sending  the  check  to  the  drawee,  is 
no  defense  in  an  action  against  the  drawer.  Lowenstein  v.^Bresler. 
109  Ala.  326,  19  South.  8G0.  See  '•Bills  and  Notes,"  Dec.  Dig.  {Key 
No.)  §  405;    Cent.  Dig.  §§  1064-1070. 

8  5  Ripley  Nat.  Bank  v.  Latimer,  64  Mo.  App.  321 ;  Western  Wheeled 
Scraper  Co.  v.  Sadilek,  50  Neb.  105,  69  N.  W.  765,  61  Am.  St.  Rep. 
550.  See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  405;  Cent.  Dig.  §§ 
1064-1010. 

8  6  Post,  p.  105. 

8 T  Allen  V.  Kramer,  2  111.  App.  205;  Gregg  v.  George,  16  Kan. 
546.  See  Western  Wheeled  Scraper  Co.  v.  Sadilek,  50  Neb.  105,  69 
N.  W.  765,  61  Am.  St.  Rep.  550.  See  "Bills  and  Notes,"  Dec.  Dig. 
{Key  No.)  §§  412,  416;   Cent.  Dig.  §§  11^1,  1164-1177. 

8  8  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  607,  19  L. 
Ed.  1008;    Williams  v.  Braun,  14  Cal.  App.  396,  112  Pac.  465;    Law- 


§§31-33)  LIAIULITY    OF    DUAWKU    TO    HOLDER  115 

udiced  thereby.  He  is  at  most  entitled  only  to  sucirpresent- 
ment  and  notices  as  will  save  him  from  loss.  Notice  should 
be  given,  however,  within  a  reasonable  time,^"  so  as  to  en- 
able the  drawer  to  take  steps  to  protect  himself.  If  such  no- 
tice is  not  given,  and  he  is  prejudiced,  he  will  be  discharged 
to  the  extent  of  the  loss  caused  by  the  delay  or  failure.^" 

The  Negotiable  Instruments  Law,  while  it  provides  that  the 
failure  to  present  a  check  for  payment  within  a  reasonable 
time  will  discharge  the  drawer  only  to  the  extent  of  the  loss 
caused  thereby,®^  fails,  apparently  by  an  oversight,  to  provide 
expressly  for  the  effect  of  failure  to  give  due  notice  of  dis- 
honor when  the  check -has  been  presented  and  not  paid.  The 
result  of  this  omission  appears  to  be  that  the  liability  of  the 
drawer,  under  that  law,  is  governed  by  the  general  provision 
that,  "when  a  negotiable  instrument  has  been  dishonored  by 
*  *  *  nonpayment,  notice  of  dishonor  must  be  given  to  the 
drawer.  *  *  *  and  any  drawer  *  *  *  to  whom  such 
notice  is  not  given  is  discharged."  °- 

Protest,  at  least  when  the  check  is  not  in  the  form  of  a 

rence  v.  Schmidt.  35  111.  440.  S.j  Am.  Dec.  371 ;  Offutt  v.  Kiicker,  2 
Ind.  App.  350,  27  N.  E.  589 ;  Lester  v.  Given,  8  Bush  (Ky.)  357 :  Ex- 
change Rank  of  Wheeling  v.  Sutton  Bank,  78  Md.  577,  28  Atl.  563.  23 
L.  R.  A.  173 :  Spink  &  Keyes  Drug  Co.  v.  Ryan  Drug  Co.,  72  Minn. 
178.  75  N.  W.  IS,  71  Am.  St.  Rep.  477;  Stewart  v.  Smith,  17  Ohio 
St.  85;  post.  p.  lis.  See  "Bills  and  Notes,"  Dec.  Duj.  {Key  No.)  § 
.',16;    Cent.  Dig.  §§  116.'t-irn. 

*>»  For  provisions  governing  notice,  see  Negotiable  Instruments 
Law,  §§  80-108. 

»o  Ilenshaw  v.  Root,  60  Ind.  220;  Pack  v.  Thomas,  21  Miss.  11, 
51  Am.  Dec.  135 ;  See.  also,  cases  supra,  notes  87,  88.  See  "Bills  and 
Notes"  Dec.  Dig.  (Key  No.)  §  U8;    Cent.  Dig.  §§  119J,,  1195. 

91  Negotiable  Instruments  Law,  §  186. 

92  Negotiable  Instruments  Law,  §  89.  Cf.  §  185.  See  Cassel  v. 
Regierer  (Sup.)  114  N.  Y.  Supp.^  001 ;  Kuflick  v.  Glasser  (Sup.)  114 
N.  Y.  Supp.  870.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  395; 
Cent.  Dig.  §§  996-1021, 


116  CHECKS  (Ch.  3 

foreign  bill  of  exchange,  is  unnecessary ;  °-''    but  in  most  ju- 
risdictions, by  statute,  protest  is  permissible.®* 
Excuses  for  Failure  to  Present  and  Give  Notice 

The  circumstances  which  will  excuse  the  holder  of  a  check 
for  failure  to  present  it  for  payment,  or  for  delay  in  present- 
ment, are  in  general  the  same  as  those  which  excuse  like  fail- 
ure to  present  a  bill  of  exchange.  Presentment  is  dispensed 
with  where  after  the  exercise  of  reasonable  diligence  it  can- 
not be  made,**^  and  where  presentment  is  waived. ®®  Delay 
is  excused  w^here  it  is  caused  by  circumstances  beyond  the  con- 
trol of  the  holder,  and  not  imputable  to  his  default,  miscon- 
duct, or  negligence, ''■^  and,  where  the  cause  of  delay  ceases  to 
operate,  presentment  must  be  made  with  reasonable  diligence.^ ^ 
Presentment  is  not  required  to  charge  the  drawer,  where  he 
had  no  right  to  expect  or  require  that  the  drawee  would  pay 

93  Wittich  V.  First  Xat.  Bank  of  Pensacola,  20  Fla.  84.3,  51  Am. 
Rep.  631;  Henshaw  v.  Root,  60  Ind.  220;  Wood  River  Bank  v. 
First  Nat.  Bank,  36  Neb.  744,  55  N.  W.  239.  See  "Bills  and  Notes^ 
Dec.  Dig.  {Key  No.)  §§3.9//,  395;   Cent.  Dig.  §§  996-10.50. 

9*  Moses  V.  President,  etc.,  of  Franklin  Bank  of  Baltimore,  34  Md. 
574 ;  Wisner  v.  First  Nat.  Bank  of  Gallitzin,  220  Pa.  21,  68  Atl.  955, 
17  L.  R.  A.  (N.  S.)  1266;  Negotiable  Instruments  Law,  §  118.  For 
provisions  in  respect  to  protest,  see  sections  152-160.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  395;    Cent.  Dig.  §§  996-1021. 

9  5  Negotiable  Instruments  Law,  §  82.  See  Purcell  v.  Allemong,  63 
Va.  739.  See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §§  391',  1,11; 
Cent.  Dig.  §§  1029-lOU,  1188-1193. 

9  0  Negotiable  Instruments  Law,  §  82.  See  Pollard  v.  Bowen,  57  Ind. 
232 ;  Emery  v.  Hobson,  62  Me.  578,  16'  Am.  Rep.  513  (indorser) ; 
Compton  V.  Oilman,  19  W.  Va.  312,  42  Am.  Rep.  776;  ante,  p.  100. 
See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  .',22;  Cent.  Dig.  §§  1196- 
1208. 

9  7  Simonds  v.  Black  River  Ins.  Co.,  Fed.  Cas.  No.  12,874  (delay  due 
to  postal  service) ;  First  Nat.  Bank  of  Belle  Plaine  v.  McConnell,  103 
Minn.  340,  114  N.  W.  1129,  14  L.  R.  A.  (N.  S.)  610,  123  Am.  St.  Rep. 
336  (loss  of  check).  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  41I ; 
Cent.  Dig.  §§  1188-1193. 

98  Negotiable  Instruments  Law,  §  81. 


§.§  31-33)  LIABILITY    OF    DHAWEK   TO    HOLDER  117 

the  instrument,""  as  where  he  drew  without  sufficient  fulT^,^"" 
unless  he  has,  notwithstanding,  reasonable  grounds  to  believe 
it  will  be  paid,^"*  or  withdrew  the  funds  before  present- 
ment/^- Presentment  is  excused  by  the  removal  of  the  drawee 
hank,  and  by  the  bankruptcy  and  suspension. ^°^  Notice  of  the 
existence  of  these  circumstances  should  be  given  to  the  drawer, 
if  known  to  him,  as  soon  as  possible  or  practicable,  or  the 
excuse  will  not  avail. ^"^ 

The  circumstances  which  will  excuse  the  holder  of  a  check 
for  failure  to  give  notice  of  dishonor,  or  for  delay  therein, 
where  notice  is  required,  are  substantially  the  same  as  excuse 
the  holder  of  a  bill  of  exchange.^""' 

Presentment  and  Notice  Before  Suit 

Although  delay  in  presentment  does  not  discharge  the  draw- 
er, except  so  far  as  he  is  thereby  prejudiced,  presentment, 
unless  excused,  is  ordinarily  necessary  to  give  the  holder  a 

OB  Negotiable  lustrunieuts  Law,  §  79. 

looHoyt  V.  Seeley,  18  Conn.  353;  Lester- Whitney  Shoe  Co.  v.  Ol- 
iver Co..  1  Ga.  App.  244,  oS  S.  E.  212 ;  Thorn  v.  Sinsheimer,  06  111. 
Apj).  .")ii ;  Beauregard  v.  Knowiton,  ir)6  Mass.  30.5,  31  N.  E.  380 ; 
r.uk  V.  Thomas.  21  Miss.  11,  51  Am.  Dec.  135.  See,  also,  Carson, 
ririe,  Scott  &  Co.  v.  Fincher.  1.38  Mich.  666,  101  N.  W.  844.  See 
'Hills  niid  .Yo/r.s."  Dec.  Difj.  {Kcu  Xo.)  §  397;  Cent.  Dig  §§  1029- 
10.',',. 

1"!  Mackall  v.  Goszler,  2  Cranch,  C.  C.  240,  Fed.  Cas.  No.  8,835; 
Hamlin  v.  Simpson,  105  Iowa,  125,  74  N.  W.  906,  44  L.  R.  A.  397. 
See  '-liilU  una  XotcM,"  Dec.  Difi.  {Key  Ko.)  §  307;  Cent.  Din.  §§  1029- 
10.',.',. 

1-' 2  Armstrong  v.  Brolaski  (C.  C.)  46  Fed.  003;  Culver  v.  Marks, 
122  Ind.  5.54,  23  N.  E.  1086,  7  L.  R.  A.  489,  17  Am.  St.  Rep.  377; 
Emery  v.  Iloltson,  63  Me.  33;  Cojiory  v.  Warren,  3  Johns.  Cas.  (N. 
Y.)  259,  2  Am.  Dec.  156.  Cf.  Sutcliffe  v.  McDowell,  2  Xott  &  McC.  (S. 
C.)  251.  Sec  "BiUs  and  Notes,"  Dec.  Dig.  (Key  No.)  §  397:  -Cent.  Dig. 
§§  1029-10.',J,. 

103  See  Purcell  v.  Allemong,  63  Va.  739.  See  ''Bills  and  Notes." 
Dec.  Dig.  {Key  No.)  §  3,97;    Cent.  Dig.  §§  1029-10.',',. 

104  See  Purcell  v.  Allemong,  63  Va.  739.  See  "Bills  and  Notes," 
Dec.  Dig.  (Key  No.)  §  397;    Cent.  Dig.  §§  1029-10',.',. 

105  See  Negotiable  Instruments  Law,  §§  100-115. 


118  CHECKS  (Ch.  3 

cause  of  action  against  the  drawer ;  his  undertaking  being  to 
pay  the  check  if  on  presentment  it  be  dishonored."®  Such 
presentment  may  be  made,  however,  at  any  time  before  suit,^^^ 
provided  that  it  be  not  so  long  delayed  that  the  action  has  not 
become  barred  by  the  statute  of  limitations.^"^ 

It  has  been  held,  also,  that  the  giving  of  notice  of  dishonor, 
unless  excused,  is  a  prerequisite  to  suit."''  On  the  other  hand, 
it  has  been  held, that  notice  of  dishonor  is  not  necessary  to 
enable  the  holder  to  maintain  an  action  against  the  drawer, 
if  he  has  not  suffered  loss  by  reason  of  failure. ^^"^ 

Statute  of  Limitations 

Since  presentment  is  necessary  to  give  the  holder  a  cause  of 
action  against  the  drawer,  it  has  been  held'  that  the  statute 
ot  limitations  does  not  begin  to  run  until  presentment  and  dis- 

106  Kelley  y.  Brown.  5  Gray  (Mass.)  108;  Spink  &  Keyes  Drug 
Co.  T.  Ryan  Drug  Co.,  72  Minn.  178,  75  N.  W.  18,  71  Am.  St.  Rep. 
477 ;  Harlver  v.  Anderson,  21  Wend.  (N.  Y.)  372 ;  Ross  v;  Saron  (Sup.) 
93  N.  Y.  Supp.  .".53 ;  Commercial  Nat.  Bank  of  Charlotte  v.  First  Nat. 
Bank,  118  N.  C.  783,  24  S.  E.  524,  32  L.  R.  A.  712,  54  Am.  St.  Rep. 
753:  Penn  Nat.  Bank  v.  Kopitzsch  Soap  Co.,  161  Pa.  134.  28  Atl- 
1077;  Compton  v.  Oilman,  19  W.  Va.  312,  42  Am.  Rep.  776.  See 
''Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §§  39Jf-39S,  U5;  Cent.  Difi. 
§§  996-1050. 

107  Church  v.  Farnham,  1  Sheld.  (N.  Y.)  393.  See  cases  in  pre- 
ceding note.  -See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §§  39.',-398  ; 
Cent.  Dig.  §§  996-1050. 

108  Brust  V.  Barrett,  16  Hun  (N.  Y.)  409.  <S'ee  "Limitation  of  Ac- 
tions," Dec.  Dig.  (Key  No.)  §  66;    Cent.  Dig.  §  366. 

109  Sherman  v.  Comstock,  2  McLean,  19,  Fed.  Cas.  No.  12.764; 
Dowling  V.  Hunt,  2  Ariz.  8,  7  Pac.  496;  Minturn  v.  Fisher,  4  Cal.  35; 
Pollard  V.  Bowen,  57  lud.  232 ;  Shultz  v.  Depuy,  3  Abb.  Prac.  (N.  Y.) 
252 ;  Goodwin  v.  Cobe,  24  Misc.  Rep.  389,  53  N.  Y.  Supp.  415 ;  Comp- 
ton V.  Gilman,  19  W.  Va.  312,  42  Am.  Rep.  776 ;  Dolph  v.  Rice,  IS  Wis. 
397,  86  Am.  Dec.  778.  See  "Bills  and  Notes"  Dec.  Dig.  {Key  No.)  § 
395;    Cent.  Dig.  §§  996-1021. 

110  Industrial  Bank  of  Chicago  v.  Bowes,  165  111.  70.  46  N.  E.  10, 
56  Am.  St.  Rep.  228 ;  Spink  &  Keyes  Drug  Co.  v.  Ryan  Drug  Co.. 
72  Minn.  378,  75  N.  W.  18,  71  Am.  St.  Rep.  477.  ^ce  "Bills  and 
Notes,'-  Dec.  Dig.  (Key  No.)  §§  39J,-398;   Cent.  Dig.  §§  996-1050. 


i 


^§34-36)  NEGOTIABILITY    AM)   TRANSFER  110 

honor;  ^"  unless  under  the  circumstances  presentmen"rTs  un- 
necessary, as  where  the  check  is  not  drawn  against  funds,  in 
which  case  the  statute  begins  to  run  from  the  issue.^^^  It  has 
been  held,  however,  that  the  presentment  must  be  made  at 
least  within  the  statutory  period  of  limitation,  and  that  if  de- 
layed beyond  that  time  the  action  is  barred.^^^ 


NEGOTIABILITY  AND  TRANSFER 

34.  IN  GENERAL — A  check  payable  to  order  is  negotiable 

by  indorsement,  and  if  payable  to  bearer  is  nego- 
tiable by  delivery,  with  the  same  effect  upon  the 
rights  of  the  parties  to  the  instrument  (except  as 
explained  in  sections  32,  33,  35,  and  36)  as  in  the 
case  of  a  demand  bill  of  exchange. 

35.  LIABILITY   OF   INDORSER— Every  indorser  of  a 

check  who  indorses  without  qualification  incurs 
the  liability  of  an  indorser  of  a  demand  bill  of  ex- 
change; that  is,  he  engages  that  on  due  present- 
ment to  the  drawee  for  payment  it  will  be  paid,  and 
that  if  dishonored,  and  due  notice  of  dishonor  be 
given  to  him,  he  will  pay  the  amount  to  the  hold- 
in  Wri^'bt  V.  MacCarty,  92  111.  App.  120.  See  "Limitation  of  Ac- 
tions," Dec.  Dig.  (Key  No.)  §  66;   Cent.  Dig.  §  366. 

112  Brush  V.  Barrett,  82  f^.  Y.  400,  37  Am.  Rep.  509.  See  "Limita- 
tion of  Actions,"  Dec.  Dig.  {Key  No.)  §  66;   Cent.  Dig.  §  366. 

113  Brust  V.  Barrett,  li;  Hun  (N.  Y.)  409. 

The  statute  begins  to  run  at  latest  after  the  lapse  of  a  reason- 
able time  for  presentment,  and  a  delay  beyond  the  period  of  limita- 
tion would  be  a  bar.  Scroggin  v.  McClelland,  37  Neb.  044,  50  N. 
\V.  208,  22  L.  R.  A.  110,  40  Am.  St.  Rep.  520 ;  Wrigley  v.  Farmers'  & 
Merchants'  SUite  Bank,  76  Xeb.  862.  108  N.  W.  132. 

In  jurisdictions  where  the  Negotiable  Instruments  Law  has  been 
enacted,  it  seems  that  the  drawer  is  discharged  by  his  laches  in 
giving  notice  of  dishonor,  although  he  suffered  no  loss  thereby.  Ante, 
p.  113.  See  "Limitation  of  Actions,"  Dec.  Dig.  (Key  No.)  §  66;  Cent. 
Dig.  §  366. 


120  -'  CHECKS  (Ch.  3 

er,  or  to  any  subsequent  indorser  who  may  be  com- 
pelled to  pay  it.  The  check  must  be  presented 
within  a  reasonable  time  after  his  indorsement  (or, 
in  states  which  have  enacted  the  Negotiable  In- 
struments Law,  after  the  last  negotiation  of  the 
check),  or  the  indorser  will  be  discharged  from 
liability  thereon  whether  he  has  suffered  loss  by 
the  delay  or  not.  What  is  a  reasonable  time  after 
the  indorsement  (or  last  negotiation)  is  determined 
by  the  rules  which  determine  what  is  a  reasonable 
time  after  its  issue  within  which  to  present  a  check 
in  order  to  charge  the  drawer.  Such  indorser  also 
makes  the  same  warranties  as  such  indorser  of 
other  negotiable  instruments. 

36.  HOLDER  IN  DUE  COURSE— A  holder  in  due  course 
— that  is,  one  who  has  taken  a  check  by  negotia- 
tion in  good  faith  and  for  value,  before  it  was  over- 
due, and  without  notice  that  it  had  been  previous- 
ly dishonored,  or  of  any  infirmity  in  the  instrument 
or  defect  in  the  title  of  the  person  negotiating  it — 
holds  the  check  free  from  any  such  defect  and 
free  from  personal  defenses  available  to  prior  par- 
ties among  themselves,  and  may  enforce  payment 
against  all  parties  liable  thereon.  ,A  check  is 
deemed  overdue  if  negotiated  an  unreasonable 
time  after  its  issue.  What  is  an  unreasonable  time 
for  this  purpose  is  a  question  of  fact,  depending 
upon  the  special  circumstances  of  each  case. 

In  General 

A  check,  if  payable  to  order  or  to  bearer,  is  a  negotiable  in- 
strument;^^*   and,  like  other  negotiable  instruments,  it  is  ne- 

ii4Keene  v.  Beard,  8  C.  B.  (N.  S.)  372;  Barbour  v.  Bayon,  .5  La. 
Ann.  304,  52  Am.  Dec.  593 ;  Bill  v.  Stewart,  156  Mass.  508.  31  X.  K. 
38G;  Syuionds  v.  Riley,  188  Mass.  470,  74  N.  E.  92G ;  Gates  City 
Building  &  Loan  Ass'n  v.  National  Bank  of  Commerce,  120  Mo.  82,  28 


§§34-36)  NKr.<)TIAI5Il.rrV    AM)   THAN>rER  121 

gotiatcd  by  indorsement  or  delivery,  accordni;^^  as  it  is  payable 
to  order  or  to  bearer.  The  rij^hts  of  the  transferee  of  a  check 
by  negotiation  do  not  (hffer  from  those  of  a  transferee  of  a 
demand  bill  of  exchange,  except  in  so  far  as  diflferent  rides 
prevail  in  respect  to  his  duty  to  make  presentment  and  to  give 
notice  of  dishonor  in  order  to  charge  the  drawer,^'^  in  re- 
spect to  the  time  after  the  indorsement  within  which  present- 
ment must  be  made  in  order  to  cliarge  indorsers/^"  and  in 
icspect  to  the  time  after  the  issue  of  the  check  when  it  will  be 
loemed  overdue,  so  as  to  charge  the  transferee  with  notice  of 
defense.*  ^^ 

Liability  of  Indorser 

A  check,  like  any  other  negotiable  instrument,  may  be  in- 
dorsed, not  merely  so  as  to  transfer  it.  but  so  as  to  impose 
upon  the  indorser  the  ordinary  liabilities  which  flow  from  the 
indorsement  of  a  negotiable  instrument.  This  is  so,  even  if 
the  check  be  payable  to  bearer  and  transferable  by  mere  de- 
livery, if  the  holder  desires  thereby  to  give  to  the  transferee 
the  added  security  of  his  name  and  liability  on  the  instrument. 
It  follows  that  the  indorser  of  a  check  who  indorses  without 
qualification  engages  to  pay  the  amount  thereof  to  the  holder, 
if  upon  due  presentment  it  be  dishonored  and  the  necessary 
proceedings  on  dishonor  be  duly  taken.**'' 

The  indorser  also  by  his  indorsement  impliedly  makes  the 
usual  warranties  that  arise  from  such  an  indorsement  of  other 
negotiable  instruments ;  that  is,  as  declared  by  the  Negotiable 
Instruments  Law,**°  he  warrants  to  all  subsequent  holders  in 

S.  W.  633:  27  L.  R.  A.  401,  47  Am.  St.  Rep.  633.  See  "Hills  and 
Notes."  Dec.  Dig.  (Key  Ko.)  §  Vi9;   Cent.  Dig.  §  373. 

115  Aute.  p.  107.  118  Post,  p.  122.  ht  Post,  p.  126. 

iisKeene  v.  Beard,  8  C.  B.  (X.  S.)  372;  Negotiable  Instruiuonts 
Law.  8  G7i.  See  "Bni.'<  and  Xotcs,"  Dec.  Dig.  (Key  No.)  §  2S0;  Cent. 
Dig.  §§  1122  i;.n. 

110  Negotiable  Instrunu'nts  Law,  §  66. 

As  to  warranties  of  indorser  without  recourse  and  of  transferror 
by  delivery,  see  section  6.">. 


122  CHECKS  (Ch.  a 

due  course  that  (1)  the  check  is  genuine;^-''  (2)  that  he  has 
good  title  to  it;^^^  (3)  that  all  prior  parties  had  capacity  to 
contract;  and  (4)  that  it  is  valid  and  subsisting.^--  A  so- 
called  indorsement  which  is  made  upon  payment  by  the  drawee 
is  to  be  distinguished  from  an  indorsement  in  its  technical 
sense.  The  effect  of  such  an  indorsement  will  be  considered 
later.123 

Presentment  and  Notice  of  Dishonor 

The  liability  of  the  drawer  of  a  check  differs  from  that  of 
the  drawer  of  a  bill  of  exchange,  in  that  he  is  not  discharged 
by  delay  in  presentment  or  in  giving  notice  of  dishonor  unless 
he  was  prejudiced  thereby. ^^*  The  liability  of  the  indorser  of 
3  check,  however,  does  not  differ  in  this  respect  from  that  of 
the  indorser  of  a  demand  bill  of  exchange.  A  check,  being 
payable  on  demand,  must,  in  order  to  charge  an  indorser,  be 
presented  for  payment  within  a  reasonable  time,  and  unless 
so  presented,  and  notice  of  dishonor  be  given,  he  is  discharged, 
irrespective  of  any  resulting  loss  to  tjie  indorser. ^-^ 

120  Warren-Sharf  Asphalt  Pav.  Co.  v.  Commercial  Nat.  Bank,  97 
Fed.  181.  38  C.  C.  A.  108;«Turnbull  v.  Bowyer,  40  N.  Y.  456,  100  Am. 
Dec.  523.  -See  "Bills  and  _A'Ofe.s,"  Dec.  Dig.  {Key  2\'o.)  §  206;  Cent. 
Dig.  §§  667-679. 

121  Wellington  Nat.  Bank  v.  Bobbins,  71  Kan.  748,  81  Pac.  487, 
114  Am.  St.  Rep.  523;  Lieber  v.  Fourth  Nat.  Bank  of  St.  Louis,  137 
Mo.  App.  158,  117  S.  W.  672.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key 
No.)  §  296;   Cent.  Dig.  §§  667-679. 

122  Birmingham  Nat.  Bank  v.  Bradley,  103  Ala.  109,  15  South.  440, 
.49  Am.  St.  Rep.  17.     See  "Bills  and  Notes"  Dec.  Dig.  (Key  No.)  § 

296;   Cent.  Dig.  §§  667-679. 

1^3  Post,  p.  163.  124  Ante,  p.  107. 

125  Comer  v.  Dufour,  95  Ga.  376,  22  S.  E.  543,  30  L.  R.  A.  300,  51 
Am.  St.  Rep.  89 ;  Travers  v.  T.  M.  Sinclair  &  Co.,  122  111.  App.  203 ; 
Northwestern  Coal  Co.  v.  Bowman,  69  Iowa,  150,  28  N.  W.  497  (cf. 
Fritz  V,  Kennedy,  119  Iowa,  628,  93  N.  W.  603) ;  First  Nat.  Bank  of 
Detroit  v.  Currie,  147  Mich.  72,  110  N.  W.  499.  9  L.  R.  A.  (N.  S.)  698, 
118  Am.  St.  Rep.  537 ;  Parker  v.  Reddick,  65  Miss.  242,  3  South.  575, 
7  Am.  St.  Rep.  646 ;  First  Nat.  Bank  of  Wymore  v.  Miller,  37  Neb. 
500,  55  N.  W.  1064,  40  Am.  St.  Rep.  499  (but  see  State  Bank  of  Goth- 


§§  3i-3G)  NEGOTIAHILIXr    AND    TUANSFEK  123 

In  determining  what  is  a  reasonable  time  within  wTiich  to 
present  a  check,  so  as  to  charge  an  indorser,  the  same  rules 
prevail  as  those  which  determine  the  time  with  respect  to  the 
drawer;  that  is,  as  has  already  been  more  fully  stated, ^'^^  in 
the  absence  of  special  circumstances,  where  the  indorsee  and 
the  bank  are  in  the  same  place,  the  check  must  be  presented 
not  later  than  the  day  after  it  has  been  received  ;  ^^^  and  where 
the  indorsee  and  the  bank  are  in  different  places  the  check 
must  be  forwarded,  not  later  than  the  next  day  after  the  check 
has  been  received,  to  the  place  where  the  bank  is  located,  and 
there  presented  not  later  than  the  day  after  its  receipt  at  that 
I)lace.^^*'  An  ordinary  check  is  intended  for  payment,  and 
not  for  indefinite  circulation,  from  which  it  follows  on  prin- 
ciple that  the  time  for  presentment,  as  against  an  indorser,  runs 
from  the  time  of  delivery  of  the  check  to  the  indorsee,  and  such 
is  the  rule  where  it  has  not  been  changed  by  statute.^-"    A  dif- 

enhurg  v.  Carroll.  SI  Neb.  4S4,  116  N.  W.  270);  Smith  v.  Janes,  20 
Weiid. '(N.  T.)  102,  32  Am.  Dec.  527;  Cuminsky  v.  Kleiner.  .34  Misc. 
Hep.  ISl.  G8  N.  Y.  Supp.  77G ;  Start  v.  Tupper,  81  Vt.  19,  (JO  Atl.  151. 
15  L.  R.  A.  (N.  S.)  213,  130  Am.  St.  Rep.  1015 ;  Kirkpatrick  v.  Pur- 
year,  93  Tenn.  409,  28  S.  W.  1130,  22  L.  R.  A.  785.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  Xo.)  §§  J,04,  JiOl ;  Cent.  Dig.  §§  1091-1103, 
1110-1112. 

128  Ante.  p.  109. 

127  Brown  v.  Schintz,  202  111.  .509.  07  X.  E.  172;  First  Nat.  Bank 
of  Detroit  v.  Currie,  147  Mich.  72,  110  N.  W.  499,  9  L.  R.  A.  (N. 
S.)  098,  118  Am.  St.  Rep.  5:!7.  See  ''Bills  and  Notes."  Dec.  Dig.  (Keg 
No.)  §  .',0.',;  Cent.  Dig.  §§  1001-1103. 

128  Northwestern  Coal  Co.  v.  Bowman,  09  Iowa,  150,  28  N.  W.  490; 
Aebi  V.  Bank  of  Evansville,  124  Wis.  73.  102  N.  W.  329.  08  L.  R.  A. 
904,  109  Am.  St.  Rep.  925 ;  Rarker  v.  Reddick,  65  Miss.  242,  S  South. 
575.  r  Am.  St.  Rep.  040;  Gilford  t.  Hardell.  88  Wis.  538.  QO  N.  W. 
1004,  43  Am.  St.  Rep.  925.  See  ''Bills  and  Notes,"  Dec.  Dig.  (Keg  No.) 
§  40.',;  Cent.  Dig.  §§  1091-1103. 

120  Northwestern  Coal  Co.  v.  Bowman,  <J9  Iowa.  1,50,  28  N.  W.  40(j 
(cf.  Plover  Savings  Bank  v.  Moodie.  135  Iowa,  685,  110  N.  W.  29; 
post,  note  132) ;  First  Nat.  Bank  of  Detroit  v.  Currie.  147  Mich.  7i. 
110  N.  W.  499,  9  L.  R.  A.  (N.  S.)  098,  118  Am.  St.  Rep.  537 ;  Gilford 
V.  Hardell,  88  Wis.  538,  00  N.  W.  1064,  43  Am.  St.  Rep.  925  (cf.  Co- 


li>4  CHiX'KS  (Ch.  3 

ferent  rule,  however,  appears  to  be  established  by  the  Negotia- 
ble Instruments  Law,  which  provides  that  "where  the  instru- 
ment *  *  *  is  payable  on  demand,  presentment  must  be 
made  within  a  reasonable  time  after  its  issue,  except  that  in  the 
case  of  a  bill  of  exchange,  presentment  for  payment  will  be  suf- 
ficient if  it  be  made  within  a  reasonable  time  after  the  last  ne- 
gotiation thereof."  ^^"  It  is  to  be  borne  in  mind  that  the  rule 
here  made  applicable  to  a  bill  of  exchange  applies  to  a  check.^^^ 
It  has  been  held  accordingly,  under  the  Negotiable  Instruments 
Law,  that  in  determining  what  is  a  reasonable  time  within 
which  to  present  a  check  in  order  to  charge  the  indorsers,  only 
the  time  between  the  last  negotiation  and  the  presentment  need 
be  considered/^^  The  effect  of  this  appears  to  be  to  continue 
the  liability  of  an  indorser  of  a  check  for'  an  indefinite  time, 
limited  only  by  the  statute  of  limitations,  provided  that  the 
check  is  presented  for  payment  within  a  reasonable  time  after 
its  last  negotiation,  no  matter  how  long  this  may  be  after  the 
drawing  or  indorsement. ^^^  The  circumstances  which  will 
excuse  the  holder  of  a  check  for  failure  to  present  it,^^*  or  for 

lumbian  Banking  Co.  v.  Bowen,  134  Wis.  218,  114  N.  W.  4.31 ;  post, 
note  132).  See  "Bills  and  A'o^es,"  Dec.  Dig.  (Key  No.)  §  J/O't;  Ooit. 
Dig.  §§  1091-1103. 

130  Negotiable  Instruments  Law,  §  7l. 

131  Negotiable  Instruments  Law.  §  185. 

132  Columbian  Banking  Co.  v.  Bowen,  1.34  Wis.  218,  114  N.  W.  451 
^(bank  check).     See,  also,  Plover  Savings  Bank  v.  Moodie,  135  Iowa, 

685,  110  N.  W.  29,  113  N.  W.  476.  Cf.  Gordon  v.  Levine,  197  Mass. 
263,  83  N.  E.  861,  15  L.  R.  A.  (X.  S.)  243,  125  Am.  St.  Rep.  361.  See 
"Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  ^0^;  Cent.  Dig.  %%  1091- 
1103. 

133  This  unfortunate  result,  observes  Professor  Branuan,  might 
have  been  avoided  by  adopting  the  corresponding  provision  of  the 
English  Bills  of  Exchange  Act,  under  which  the  drawer  of  a  bill  pay- 
able on  demand  is  discharged  unless  presentment  be  made  within  a 
reasonable  time  after  its  issue,  and  the  indorser  unless  it  is  pre- 
sented within  a  reasonable  time  after  his  indorsement.  Braunun, 
Neg.  Inst.  Law,  p.  224. 

134  See  Negotiable  Instruments  Law,  §§  SO,  82. 


§§  34-30)  NEGOTIAHII.ITY    AND   TRANSFER  125 

delay  in  presentment.'"  or  for  failure   to  give"*'   of^lelay 
in  giving  '''"  notice  of  dishonor,  are  substantially  the  same  as 
those  which  excuse  like  delay  or  failure  in  respect  to  a  bill 
of  exchange.'^** 
Holder  ill  Due  Course 

As  in'  the  case  of  other  negotiable  instruments,  one  to 
whom  a  check  is  negotiated  for  value  and  in  good  faith  before 
it  is  overdue  takes  it  free  from  personal  defenses  available 
to  prior  parties  of  which  he  was  without  notice."^  The  trans- 
fer must  be  for  value.^***  Of  course,  one  who  receives  a  check 
from  one  who  was  himself  a  holder  in  due  course  has  all  the 
rights  of  such  former  holder,  although  the  circumstances  un- 
der which  he  receives  the  check  are  not  such  as  would  other- 
wise constitute  the  receiver  a  holder  in  due  course. ^^^ 

ISO  See  Nt'^'otiaMe  Instruments  Law,  §  81. 

130  See  Nejjotialile  Instruments  Law,  §§  109-112,  115. 

187  See  Xe^'otiable  Instruments  Law,  §  11-3. 

188  See,  ante,  p.  116. 

130  Bill  V.  Stewart,  156  Mass.  508,  31  N.  E.  .386;  Symonds  t.  Riley, 
188  Mass.  470.  74  N.  E.  926;  Buzzell  v.  Tobin,  201  Mass.  1,  86  N.  E. 
92.3 :  Gate  City  Building  &  Loan  Ass'n  v.  National  Bank  of  Com- 
merce. 120  Mo.  82.  28  S.  W.  03.3.  27  L.  R.  A.  401,  47  Am.  St.  Rep.  0.3.3  ; 
.Tacks  V.  Darrin.  3  E.  D.  Smith  (N.  Y.)  .557;  Matlock  v.  Scheuerman. 
.-.1  Or.  49.  93  Pac.  823.  17  L.  R.  A.  (N.  S.)  747 ;  Capital  Savings  Rank 
&  Trust  Co.  V.  Montpelier  Savings  Bank  &  Trust  Co.,  77  Vt.  180,  59 
Atl.  827. 

A  holder  in  due  course  of  a  lost  or  stolen  check  acquires  good 
title.  Unaka  Nat.  Bank  v.  Butler,  113  Tenn.  574,  83  S.  W.  055.  See, 
also.  Poess  v.  Twelfth  Ward  Bank  of  City  of  New  York.  43  Misc. 
Rep.  45.  80  N.  Y.  Supp.  8.57;  Negotiable  Instruments  Law,  §§  52-.59; 
aises  post,  notes  14.3-140.  See  ''Bills  and  A'o/es,"  Dec.  Difj.  {Key  'So.) 
§  S6o;   Cent.  Did.  B  07,1,-950. 

i-toshawmut  Nat.  Bank  v.  Manson.  ICS  Mass.  41^5,  47  N.  E.  VM\ 
Citizens'  State  Bank  v.  Cowles,  180  N.  Y.  340,  73  N.  E.  33,  105  Am. 
St.  Rep.  705.  See  Negotiable  Instruments  Law,  §  54 ;  ante,  p.  41. 
.Sec  "Bills  and  Notes,"  Dec.  Din.  (Key  No.)  §  35.3;  Cent.  Dig.  §§  S98- 
90S. 

m  Symonds  v.  Riley,  188  Mass.  470,  74  N.  E.  926.  See  Negotiable 
Instruments  Law.  §  58.  Sec  "Bills  and  Notes"  Dec.  Dig.  (Key  Yo.) 
§  3(li:    Cent.  Dig.  U  9.37-9 ',3. 


126  CHECKS  (Ch.  3 

Stale  Check 

When  a  check  is  to  be  deemed  overdue  or  "stale,"  so  as  to 
let  in  defenses  against  the  transferee,  is  a  question  in  respect 
to  which  the  courts  have  not  generally  laid  down  any  very 
definite  rule,  other  than  that  a  check  will  be  deemed  "stale" 
after  the  expiration  of  a  reasonable  time.  Logically,  perhaps, 
this  would  mean  such  time  as  is  reasonably  necessary  for  the 
check  to  reach  the  drawee  bank.  This  would  practically  mean, 
however,  that  checks  should  not  circulate  at  all.  Checks,  "al- 
though payable  on  demand,  are  not  treated  as  being  dishonored 
or  overdue  on  the  day,  or  immediately  after  the  day,  of  their 
date.  A  holder,  who  takes  a  check  in  good  faith  and  for 
value  several  days  after  it  is  drawn,  receives  it  without  being 
subject  to  defenses  of  which  he  has  no  notice  before  or  at  the 
time  his  title  accrues.  This  is  the  rule  as  settled  by  uniform 
practice  and  the  current  decisions  in  the  courts  of  the  United 
States."  ^*-  Thus  checks  have  been  held  not  stale  when  only 
a  few  days  old,^*^  and  stale  when  a  year  or  more  ^**  or  a 
few  months  old,^*^  or  even  less.^*"  On  the  whole,  the  rule 
appears  to  be  that  a  check  is  stale  after  the  lapse  of  a  rea- 
sonable time   from   its  issue,  and   that  what   is  a   reasonable 

142  Ames  V.  Meriam,  98  Mass.  294.  See  "Bills  and  Notes,"  Dec. 
Dig.  {Ken  No.)  §  3^8;    Gent.  Dig.  §§  STO-STTVo. 

143  Rothschild  V.  Corney,  9  B.  &  C.  388  (6  days) ;  Himmelmann  v. 
Hotaliug,  40  Cal.  Ill,  6  Am.  Rep.  GOO ;  Lester  v.  Given,  8  Bush  (Ky.) 
357 ;  First  Nat.  Banlc  of  Rochester  v.  Harris,  108  Mass.  514 ;  Estes 
V.  Levering  Shoe  Co.,  59  Minn.  504,  61  N.  W.  674,  50  Am.  St.  Rep. 
424  (6  day.s) ;  Fealey  v.  Bull,  163  N.  Y.  307,  57  N.  E.  mi  (5  days) ; 
Davis  V.  Dayton,  7  Misc.  Rep.  488,  27  N,  Y.  Supp.  969.  See  "Bills 
and  Notes,"  Dec.  Dig.  {Key  No.)  §  3^8;   Cent.  Dig.  §§  870-8771^. 

i44Walden  v.  Webber,  15  Ky.  Law  Rep.  846;  Skillnian  v.  Titus, 
32  N.  J.  Law,  96 ;  Lancaster  feank  v.  Woodward,  18  Pa.  361,  57  Am. 
Dec.  618.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  SJfS;  Cent. 
Dig.  §§  870-8771/2. 

145  First  Nat.  Bank  of  Newton  v.  Needham,  29  Iowa,  249.  See 
"Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §  3.'i8;   Cent.  Dig.  §§  S7';-877i/o. 

iioVairin  v.  Hobson,  8  La.  50,  28  Am.  Dec.  125.  See  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §  S//8,-   Cent.  Dig.  §§  S7'9-S77i/2. 


§  37)  I.IAHILITY    OF    DRAWEE   TO    HOLDER  127 

time  depends  upon  the  special  circumstances  of  cadT  ca>c. 
Such  appears  to  be  the  rule  as  declared  by  the  Negotiable 
Instruments  Law :  "Where  an  instrument  payable  on  demand 
is  negotiatetl  an  unreasonable  time  after  its  issue,  the  holder 
is  not  deemed  a  holder  in  due  course."  ^'•^  Since  regard  is  to 
be  had  to  the  nature  of  the  instrument,  in  determining  what 
is  a  reasonable  time,  it  seems  clear  that  a  bank  check  drawn  on 
a  bank  at  a  distant  point  may  reasonably  be  outstanding  for 
a  longer  period  than  a  mere  local  check  without  being  deemed 
overdue  paper. ^■*® 

LIABILITY  OF  DRAWEE  TO  HOLDER 

37.  In  accordance  with  the  rule  which  has  prevailed  in  most 
jurisdictions,  and  which  is  now  established  in  all 
states  which  have  adopted  the  Negotiable  Instru- 
ments Law,  a  check  of  itself  does  not  operate  as 
an  assignment  of  any  part  of  the  funds  to  the  credit 
of  the  drawer  with  the  bank,  and  the  bank  is  not 
liable  to  the  holder,  unless  and  until  it  accepts  or 
certifies  the  check.  But  in  some  jurisdictions  the 
rule  has  prevailed  that  if  the  bank,  being  in  funds, 
refuses  on  presentment  to  pay  a  check,  it  is  liable 
thereon  to  the  holder. 

By  weight  of  authority,  the  holder  of  a  check  has  no  right 
of  action  against  the  bank  on  which  it  is  drawn  for  refusal  to. 
pay  it.  unless  the  bank  has  assumed  an  obligation  to  him  to 
pay   it  by   certifying  it  or  accepting  it ;    his  only  remedy  in 

i^T  Nejintiiililo  lustruuitMits  Law,  §  54.  See  Singer  Mf.^.  Co.  v. 
SuDinu-rs.  143  N.  C.  102.  55  S.  E.  522 ;  Matlock  v.  SchoutTinau.  51  Or. 
40.  0.3  Pac.  823,  17  L.  R,  A.  (N.  S.)  747.  See  "Bills  and  Notes,"  Dec. 
Did.  (Key  No.)  §  3.',S;   Cent.  Dig.  §§  810-811  V>. 

i*s  See  Bull  v.  First  Nat.  Bank.  123  U.  S.  105,  8  Sup.  Ct,  62.  31 
L.  Ed.  07  (cf.  La  I»ue  v.  Fir.st  Nat.  Bank  of  Kasson.  31  Minn.  33.  IG 
N.  W.  420).  Ante.  p.  111.  Sec  "BilU  and  Notes"  Dec.  Dig.  (Key 
No.)  §  S.'tS;  Cent.  Dig.  §§  810-811^2. 


128  CHECKS '  (Ch.  3 

such  case  being  against  the  drawer,  and  against  the  indorsers, 
if  there  are  any.^*^  This  results  strictly  from  the  nature  of 
the  instrument  as  a  bill  of  exchange;  the  obligations  of  all 
parties  to  the  instrument  being  based  upon  a  general  per- 
sonal credit,  so  that,  unless  the  drawee  has  assented  to  the 
order  by  certifying  the  check  or  accepting  it,  he  is  not  liable 
on  the  instrument.  ^^^  It  is  true  that  by  the  implied  contract 
between' a  bank  and  its  depositor  the  bank  undertakes  to  pay 
checks  drawn  by  him  to  the  amount  of  the  deposit,  and  that 
for  a  failure  to  honor  his  check,  when  there  are  sufficient  funds 
to  his  credit,  the  bank  is  liable  to  the  depositor;  ^^^    but  this 

1*9  Hopkinson  v.  Forster,  L.  R.  19  Eq.  74;  Schroeder  v.  Central 
Bank,  34  Law  T.  (N.  S.)  735 ;  National  Bank  of  the  Republic  v.  Mil- 
lard, 10  Wall.  152,  19  L.  Ed.  897 ;  First  Xat.  Bank  v.  Whitman,  94 
U.  S.  343,  24  L.  Ed.  229;  Florence  Mining  Co.  v.  Brown,  124  U.  S. 
385,  8  Sup.  Ct.  531,  31  L.  Ed.  424;  National  Commercial  Bank  v.. 
Miller,  77  Ala.  168,  54  Am.  Rep.  50 ;  Boettcher  v.  Colorado  Nat.  Bank, 
15  Colo.  16,  24  Pac.  582 ;  Georgia  Seed  Co.  v.  Talmadge  &  Co.,  96  Ga. 
254.  22  S.  E.  1001 ;  Harrison  v.  Wright,  100  lud.  515,  58  Am.  Rep. 
805 ;  Case  v.  Henderson,  23  La.  Ann.  49,  8  Am.  Rep.  590 ;  Carr  v.  Na- 
tional Security  Bank,  107  Mass.  45,  9  Am.  Rep.  6 ;  Moses  v.  President, 
etc.,  of  Franklin  Bank  of  Baltimore,  34  Md.  574 ;  Lonier  v.  State  Sav- 
ings Bank,  149  Mich.  483,  112  N.  W.  1119;  Merchants'  Nat.  Bank 
V.  Coates,  79  Mo.  168 ;  Dickinson  v.  Coates,  79  Mo.  2.50,  49  Am.  Rep. 
2^8 ;  Creveling  v.  Bloomsbury  Nat.  Bank,  46  N.  J.  Law,  255,  50  Am. 
Rep.  417;  ^tna  Nat.  Bank  v.  Fourth  Nat.  Bank  of  City  of  New 
York,  46  N.  Y.  82,  7  Am.  Rep.  314 ;  Attorney  General  v.  Continental 
Life  Ins.  Co.,  71  N.  Y.  325,  27  Am.  Rep.  55;  First  Nat.  Bank  of 
"Union  Mills  v.  Clark,  134  N.  Y.  308,  32  N.  E.  38,  17  L.  R.  A.  580; 
Commercial  Nat.  Bank  of  Charlotte  v.  First  Nat.  Bank,  118  N.  C.  783, 
24  S.  E.  524,  32  L.  R.  A.  712,  54  Am.  St.  Rep.  753 ;  Cincinnati,  H.  & 
D.  R.  Co.  V.  Metropolitan  Nat.  Bank,  54  Ohio  St.  60,  42  N.  E.  701,  31 
L.  R.  A.  653,  56  Am.  St.  Rep.  700;  Tibby  Bros.  Glass  Co.  v.  Farm- 
ers' &  Mechanics'  Bank  of  Sharpsburg,  220  Pa.  1,  69  Atl.  280,  15  L. 
R.  A.  (N.  S.)  519;  Aikin  v.  Jones,  93  Tenn.  353,  27  S.  W.  669,  25  L. 
R.  A.  523,  42  Am.  St.  Rep.  921 ;  House  v.  Kountze,  17  Tex.  Civ.  App. 
402,  43  S.  W.  5<j1  ;  Commercial  Bank  of  Tacoma  v,  Chilberg,  14  Wash. 
247,  44  Pac.  264,  53  Am.  St.  Rep.  873.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  Xo.)  §  l-iO;   Cent.  Dig.  §§  380-397. 

150  Post,  p.  131.  151  Post,  p.  143. 


§  37)  LIABILITY    OF    DRAWEE    TO    HOLDER  129 

contract  is  between  the  bank  and  the  depositor,  and  l5?fween 
the  bank  and  tlie  holder  there  is  no  privity  of  contract. 

In  some  jurisdictions,  however,  it  has  been  held)  that  if  the 
bank,  being  in  funds,  refuses  on  presentment  to  honor  a  check, 
it  is  Hable  thereon  to  the  holder.^''-  Generally  the  doctrine 
is  based  on  the  view  that  a  check  operates  as  an  assignment 
of  the  funds  of  the  drawer  to  the  amount  of  the  check,  an  as- 
signment which  becomes  complete  upon  presentment,  so  that 
if  the  bank  improperly  refuses  payment  the  holder  may  main- 
tain an  action  against  the  bank  on  the  check.  Since  the  re- 
lation between  the  bank  and  its  depositor  is  that  of  debtor  and 
creditor,  the  depositor  may,  of  course,  assign  his  claim ;  but 
to  construe  a  check  as  an  assignment  is  to  lose  sight  of  its 
essential  nature  as  a  negotiable  instrument.  A  check,  like  an 
ordinary  bill  of  exchange,  is  an  unconditional  order  to  pay 
a  sum  certain  in  money,  and  an'Order  to  pay  out  of  a  particu- 
lar fund  is  not  unconditional.  An  instrument  otherwise  in  the 
form  of  a  check,  which  purported  to  be  drawn  on  funds  de- 
posited by  the  drawer,  would,  indeed,  operate  as  an  assign- 
ment.   It  is  sometimes  loosely  said  that  a  check  is  distinguisha- 

i62Muim  V.  Rurch.  25  111.  35;  Fourth  Nat.  Bank  of  Chicago  v. 
Cit.v  Nat.  Bank  of  Oraud  R.apids,  68  111.  308;  Union  Nat.  Bank  v. 
Oceana  County  Bank.  80  111.  212,  22  Am.  Rep.  185 ;  Gage  Hotel  Co. 
V.  Union  Nat.  Bank.  171  111.  531.  49  N.  E.  420.  39  L.  R.  A.  479,  63 
Am.  St.  Rep.  27f):  Roberts  v.  Corbiu,  20  Iowa,  3i5,  96  Am.  Dec.  146: 
Bloom  V.  Winthrop  State  Bank;  121  Iowa,  101.  9G  N.  W.  7.33 ;  Com- 
monwealth V.  Kentucky  'Distilleries  &  Warehou.se  Co..  132  Ky.  521. 
110  S.  W.  706,  21  L.  R.  A.  (N.  S.)  30.  136  Am.  St.  Rep.  186;  Was- 
gatt  V.  Flnst  Nat.  Bank  (Minn.)  134  N-  W.  228;  Columbia  Nat. 
Bank  of  Lincoln  v.  German  Nat.  Bank,  56  Neb.  803.  77-  N.  W. 
346;  Guthrie  Nat.  Bank  v.  Gill,  6  Okl.  500,  54  Pac.  434;  Fogar- 
ties  V.  Bresident.  etc..  of  State  Bank,  12  Rich.  (S.  C.)  518,  78  Am. 
Dec.  408;  Simmons  Hardware  Co.  v.  Bank  of  Greenwood,  41  S.  C. 
177.  19  S.  E.  51)2,  44  Am.  St.  Rep.  700 ;  Pease  v.  Landauer,  63  Wis. 
20.  22  N.  W.  847.  53  Am.  Rep.  247. 

In  most  of  these  states,  the  rule  has  been  changed  by  the  enact- 
ment of  the  Negotiable  Instruments  Law.  Post,  p.  1.30.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  l.',0;   Cent.  Dig.  §§  3S0-397. 

TnF.BKS.&  B.— 9 


130  CHECKS  (Ch.  3 

ble  from  an  ordinary  bill  of  exchange,  in  that  it  is  always 
drawn  on  fundls  deposited  with  the  drawee;  but  in  truth  a 
check  does  not  in  terms  purport  to  be  so  drawn,  and  a  check  is 
not  any  less  a  check  when  not  actually  drawn  upon  funds, 
while  an  instrument  which  was  in  express  terms  drawn  upon 
funds  deposited  with  the  drawee,  however  sufficient  it  might 
be  as  an  assignment,  would  not  be  a  check.  To  construe  a 
check  as  an  assignment  is,  therefore,  to  deny  its  existence  as  a 
check.^^^ 

While  a  check  of  itself  does  not  operate  as  an  assignment 
of  the  drawer's  funds  in  the  hands  of  the  drawee,  it  is 
competent  for  the  parties  to  create  such  an  assignment  by 
agreement,  oral  or  otherwise,  in  addition  to  the  check,  that 
such  shall  be  the  effect  of  the  transaction.  This  is  held,  even 
by  courts  which  recognize  that  a  check  does  not  constitute 
m  assignment. ^^*  In  such  case  it,  however,  seems  that  the 
action  lies,  not  on  the  check,  but  on  the  collateral  agreement 
for  an  assignment,  of  which  the  check  may  be  evidence.^^^ 

Happily  this  general  question  has  now  been  settled  in  most 
states  by  the  enactment  of  the  Negotiable  Instruments  Law, 
which,  in  accordance  with  what  has  been  the  prevailing  rule, 
provides :  "A  check  does  not  of  itself  operate  as  an  assign- 
ment of  any  part  of  the  funds  to  the  credit  of  the  drawer  with 
the  bank,  and  the  bank  is  not  liable  to  the  holder,  unless  and 
until  it  accepts  or  certifies  the  check."  ^^^ 

153  See  2  Ames,  Cas.  Bills  &  Notes.  735;   11  Harv.  LawJRev.  548. 

1B4  Fourth  Street  Nat.  Bank  v.  Yardley,  165  U.  S.  634,  17  Sup.  Ct. 
439.  41  L.  Ed.  855 :  For  tier  v.  Delgado  &  Co..  122  Fed.  604,  59  C.  C. 
A.  180.  See  "Assignments,"  Dec.  Dig.  {Key  No.)  §  49;  Cent  Dig.  f§ 
85-98. 

1S5  See  11  Harv,  Law  Rev.  60. 

1B6  Negotiable  Instruments  Law.  §  189. 


§g  38-39)  CKUTIFIEU    CHECKS  131 

CERTIFIED  CHECKS 

38.  LIABILITY   OF  BANK— Where  a  check  is  certified 

to  be  good  by  the  bank  on  which  it  is  drawn,  the 
bank  assumes  an  unconditional  obligation  to  the 
holder  to  pay  it  on  presentment. 

39.  LIABILITY    OF    DRAWER   AND    INDORSERS— 

Where  the  holder  of  a  check  procures  it  to  be  cer- 
tified, the  drawer  and  all  indorsers  are  discharged 
from  liability  thereon;  but  where  the  drawer  be- 
fore delivery  procures  it  to  be  certified,  he  is  not 
thereby  discharged. 

Nature  and  Effect  of  Certification 

Strictly  speaking,  a  check  is  not  presentable  for  acceptance, 
but  is  presentable  only  for  payment.  The  bank  may,  how- 
ever, assume  the  obligation  of  paying  the  amount,  if  it  sees 
fit,  by  certifying  the  check. 

Certification  is  often  said  to  be  the  equivalent  of  acceptance, 
but  this  is  somewhat  misleading.  Acceptance  is  the -significa- 
tion by  the  drawee  of  his  assent  to  the  order  of  the  drawer.^^' 
While  a  bill  contains  in  express  terms  only  an  order  to  pay, 
by  the  law  merchant,  if  the  bill  is  payable  at  a  future  day, 
or  at  or  after  sight,  the  drawer  also  orders  the  draw^ee  to  ac- 
cept the  bill  upon  presentment — that  is,  to  promise  to  pay  it 
according  to  the  terms  of  the  order;  ^°^  but  if  the  order  is 
to  pay  on  demand,  the  order  does  not  call  for  acceptance.  By 
the  certification  of  a  check,  the  drawee  does,  indeed,  promise 
to  pay  the  amount  of  the  instrument  to  the  holder ;  but  certi- 
fication is  difi'erent  from  mere  acceptance,  in  that  it  is  not 
an  added  obligation,  but  a  substituted  obligation. ^^^  This  holds 
true  at  least  where  the  certification  is  at  the  request  of  the 

1B7  See  Negotiable  InstruiuoiUs  I>a\v,  §  132.  ' 
188  2  Ames,  Cas.  Bills  &  Notes,  787. 
169  2  Ames,  Cas.  Bills  &  Notes,  801. 


132  CHECKS  (Ch.  3 

holder.  The  check  calls  for  payment,  and  not  for  acceptance, 
and  if  the  holder  sees  fit,  instead  of  receiving  the  money,  to 
take  the  obligation  of  the  bank  for  payment  at  such  time  as 
he  shall  call  for  it,  he  thereby  discharges  the  drawer  and  takes 
the  sole  obligation  of  the  drawee/*^"  The  transaction  is  in 
legal  effect  the  same  as  if  the  holder  surrendered  the  check, 
received  payment,  deposited  the  money  with  the  bank,  and 
received  its  certificate  of  deposit  or  note  payable  on  demand. ^''^ 
Upon  certification  the  bank  charges  the  amount  to  the  drawer 
precisely  as  if  the  check  were  paid,  and  the  drawer  loses  all 
control  of  the  fund  and  cannot  stop  payment.^^^  The  ob- 
ligation of  the  certifying  bank  is,  therefore,  to  pay  the  amount 
of  the  instrument  to  the  holder  upon  demand. ^"^ 

It  follows  from  what  has  been  said  that  after  certification 
the  bank  cannot  refuse  payment  to  the  payee  or  other  bona  fide 
holder,  on  the  ground  that  the  drawer's  funds  were  insuf- 
ficient.^^*   The  bank's  position  is  the  same  as  if  it  had  paid  the 

leo  Post,  p.  136. 

161  See  cases  cited  post,  note  163. 

i62Willets  V.  Phoenix  Bank,  2  Duer  (N.  T.)  121;  First  Nat.  Bank 
of  Jersey  City  v.  Leach,  52  N.  Y,  350,  11  Am.  Rep.  708;  Freund  v. 
Importers'  &  Traders'  Nat.  Bank,  12  Hun,  537;  Id.,  76  N.  Y.  352. 
See  "Banlcs  and  Banlcinff,"  Dec.  Dig.  {Key  No.)  §  lJf5;  Cent,  Dig.  §§ 
J,19-433. 

163  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,  19  L. 
Ed.  1008 ;  Bickford  v.  First  Nat.  Bank  of  Chicago,  42  111.  238,  89  Am. 
Dec.  436 ;  Willets  v.  Pha-nix  Bank,  2  Duer  (N.  Y.)  121 ;  Farmers'  & 
Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank,  14  N.  Y.  623  ;  Id.,  16 
N.  Y,  125,  69  Am.  Dec.  678 ;  Meads  v.  ^Merchants"  Bank  of  Albany,  25 
N.  Y.  143,  82  Am.  Dec.  331 ;  Poess  v.  Twelfth  Ward  Bank  of  City 
of  New  York,  43  Misc.  Rep.  45,  86  N.  Y.  Supp.  857 ;  Girard  Bank  v. 
Bank  of  Penn  Tp.,  39  Pa.  92,  80  Am.  Dec.  507 ;  Andrews  v.  German 
Nat.  Bank,  9  Heisk.  (Tenn.)  211,  24  Am.  Rep.  3()0. 

Certification  gives  no  lien  on  the  assets  of  the  hank.  People  v.  St. 
Nicholas  Bank,  77  Hun.  159,  28  N.  Y.  Supp.  407.  See  "Banks  and 
BanUng,"  Dec.  Dig.  {Key  Xo.)  §  1J^5;   Cent.  Big.  §§  419-433. 

1C4  Espy  V.  First  Nat.  Bank,  IS  Wall.  621,  21  L.  Ed.  947;  Hayes  v. 
Northern  Pac.  R.  Co.,  74  Fed.  279,  20  C.  C.  A.  52;  Jackson  Paper 
Mfg    Co.  V.  Commercial  Nat.  Bank,  199  111.  151,  65  N.  E.  136,  59  L. 


§§  38-39)  CEKTIFIED   CHECKS  l3o 

check  to  the  holder,  in  wiiich  case  it  could  not,  by  the  weigiit 
of  authority,  recover  the  amount  from  him  upon  the  ground 
that  it  had  paid  under  a  mistake  as  to  the  sufficiency  of  the 
funds. ^°°  A  different  case  is  presented  if  the  certification  was 
procured  by  fraud  and  the  check  has  not  passed  into  the  hands 
of  a  holder  in  due  course.^®" 

Upon  the  ground  that  certification  at  the  request  of  the 
iiolder  discharges  the  drawer,  and  substitutes  the  sole  ob- 
ligation of  the  bank,  thereby  operating  as  payment  so  far  as 
concerns  the  drawer,  it  has  been  held,  also,  that  the  bank  can- 
not resist  payment  upon  a  ground  which  would  have  been  a 
defense  in  an  action  by  the  payee  or  a  holder  standing  in  his 
shoes  against  the  drawer,  as  that  the  check  was  procured  from 
the  drawer  by  fraud,  although  the  drawer  has  notified  the  bank 
of  his  defense  and  instructed  the  bank  not  to  pay  the  check.^^^ 

11.  A.  057,  93  Am.  St.  Rep.  113:  First  Nat.  Bank  v.  Union  Trust  Co., 
15S  Micb.  94,  122  N.  W.  547,  133  Am.  St.  Rep.  3G2. 

In  New  York  the  rule  appears  to  have  been  that  the  bank  may 
revoke  the  certifloiition,  unless  there  has  been  a  change  of  position 
upon  faith  thereof.  Irving  Bank  v.  Wetherald,  36  N.  Y.  335;  Na- 
tional Park  Bank  of  New  York  v.  Steele  &  Johnson  Mfg.  Co.,  58 
Hun.  SI,  11  N.  Y.  Supp.  538;  Brooklyn  Trust  Co.  v.  Toler,  05  Hun, 
187.  19  N.  Y.  Supp.  975,  affirmed  138  N.  Y.  075,  34  N.  E.  515.  See 
Negotiable  Instruments  Law,  §  02.  See  ''Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  1^5;   Cent.  Dig.  §§  .'il9-^33. 

10  5  Post,  p.  148. 

166  Bank  of  Republic  v.  Baxter,  31  Vt.  101. 

^here  the  payee  obtained  certification  by  fraud,  the  bank  was  not 
estopped  as  against  a  transferee  in  good  faith  and  for  value,  but  by 
assignment  and  not  by  negotiation.  Goshen  Nat.  Bank  v.  Bingham, 
lis  N.  Y.  349,  23  N.  E.  180,  7  L.  R.  A.  595,  10  Am.  St.  Rep.  705  (cf. 
Meuer  V.  Phenix  Nat.  Bank,  94  App.  Div.  331,  88  N.  Y.  Supp.  83). 
Sec  "Banks  and  Banking,''  Dec.  Dig.  (Key  So.)  §  lJ,5j  Cent.  Dig.  §§ 
419-J,33. 

lOT  Times  Square  Automobile  Co.  v.  Rutherford  Nat.  Bauk,  77  N.  J. 
Law,  G49,  73  Atl.  479,  134  Am.  St.  Rep.  811  (intimating  that  the 
defense  would  be  open  if  certification  had  been  at  re(iuest  of  the 
drawer). 

Where  B.  &  Co.  drew  a  check  to  the  order  of  B.,  who  had  it  cer- 


134  CHECKS  (Ch.  3 

Delay  in  presentment  does  not  discharge  the  bank,  and  pre- 
sentment may  be  made  at  any  time  within  the  period  fixed 
by  the  statute  of  Hmitations.^''  On  principle,  as  in  the  case 
of  ordinary  certificates  of  deposit,^"*  demand  is  a  prerequisite 
to  the  holder's  right  of  action  against  the  bank ;  '■'"^  but  under 
the  Negotiable  Instruments  Law  it  seems  that  presentment  is 
not  necessary  to  charge  the  bank.^^^ 
Certification  of  Forgfd  or  Altered  Check 

After  certification  the  bank  cannot  refuse  payment  to  a 
holder  in  due  course  on  the  ground  that  the  drawer's  signature 
was  forged."^     Here  again  the  bank's  position  is  the  same 

tified,  and  Indorsed  it  to  W.  in  payment  for  a  horse,  and  W.  deposited 
the  check  in  iJlaiutifTs  bank,  which  credited  him  with  the  amount, 
but  was  notified  by  B.,  before  payment  to  W.,  that  W.  had  obtained 
the  check  by  fraud,  in  an  action  by  plaintiff  against  the  drawee  bank, 
wherein  B.  on  interpleader  was  substituted  as  defendant,  it  was  held 
that  plaintiff  might  recover.  Plaintiff  bank  was  held  to  be  a  holder 
for  value,  though  it  had  not  parted  with  value.  Blake  v.  Hamilton 
Dime  Savings  Bank  Co.,  79  Ohio  St.  189,  87  N.  E.  73,  20  L.  R.  A.  (N. 
S.)  200.  128  Am.  St.  Rep.  684. 

It  would  seem  that  in  such  cases  the  fraudulent  payee  or  holder 
should  be  charged  as  a  constructive  trustee  for  the  drawer,  and  that 
the  bank,  if  it  had  been  notified  by  the  drawer  not  to  pay,  sliould 
have  the  right  and  duty  to  protect  the  drawer  by  refusing  payment 
to  the  holder.  See  19  llarv.  Law  Rev.  143.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  So.)  §  1^5;  Cent.  Dig.  §§  419-^33. 

i«8  Jackson  Paper  Mfg.  Co.  v.  Commercial  Nat.  Bank,  199  111.  151, 
0.>  N.  E.  130.  59  L.  R.  A.  657,  93  Am.  St.  Rep.  113.  See  "Banks  and 
Banking."  Dec.  Dig.  {Key  2fo.)  §  1^5;  Cent.  Dig.  §§  jil9-433;  "Bills 
and  yolcs"  Dec.  Dig.  {Key  No.)  §§  39Jt-398;  Cent.  Dig.  §§  996-1050. 

»6K  Ante,  p.  79. 

I'O  I'.ank  of  British  North  America  v.  Merchants'  Nat.  Bank,  91 
N.  Y.  KJC.  See  "Bills  and  Notes,"  Dec.  Dig.  (Key  No.)  §§  39^-398; 
Cent.  Dig.  §§  99G-1050. 

171  Negotiable  Instruments  Law,  §  70;  ante,  p.  81. 

i72Fir.st  Nat  Bank  of  Chicago  v.  Northwestern  Nat.  Bank,  152 
III.  2tM;.  38  N.  E.  739,  20  L.  R.  A.  289,'  43  Am.  St.  Rep.  247;  Commer- 
cial &  rarniers'  Nat.  Bank  of  Baltimore  v.  First  Nat.  Bank  of  Balti- 
more. 30  Md.  11,  90  Am.  Dec.  554;  Farmers'  &  :Mechanics'  Bank  v 
Hutchors'   &   Drovers'   Bank,   10   N.   Y.   125.  69   Am.   Dec.   678.     See 


§§  38-39)  CERTIFIED    CHECKS  135 

as  if  it  hadi  paid  the  check  to  the  holder,  in  which  case  it 
could  not  recover  the  amount  from  him  upon  that  ground."'' 
There  is  even  authority  for  the  view  that  the  bank  cannot 
refuse  payment  to  a  holder  in  due  course  on  the  ground  that 
prior  to  the  certification  the  body  of  the  check  was  altered, 
as  where  the  amount  was  raised  ;  ^'^*  but  the  preponderance  of 
authority  is  against  this  view.  Here  it  is  generally  held  that 
the  holder  is  1n  no  better  position  than  a  holder  who  had  re- 
ceived payment  of  a  raised  check,  who  would  be  compelled 
to  refund  to  the  bank.^^^  In  other  words,  it  has  been  held 
that,  while  the  bank  by  certifying  admits  the  genuineness  of 
the  drawer's  signature,  it  does  not  admit  the  genuineness  of 
the  bodly  of  the  instrument.^ "^ 

The  Negotiable  Instruments  Law  provides  that,  "where  a 
check  is  certified  by  the  bank  on  which  it  is  drawn,  the  cer- 
tification is  equivalent  to  an  acceptance,"  ^'^  and  also  that  "the 

"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  145;  Cent.  Dig.  §§  J,2/f, 
-',25. 

17  3  Post,  p.  IGO. 

174  Louisiana  Nat.  Bank  v.  Citizens'  Bank  of  Louisiana.  28  La. 
Ann.  189,  26  Am.  Rep.  92.  See,  also.  Espy  v.  First  Nat.  Bank,  18 
Wall.  604,  21  L.  Ed.  947.  See  "BanJcs  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  145;  Cent.  Dig.  §§  424,  425. 

17  5  Post,  p.  167. 

176  Marine  Nat.  Bank  v.  National  City  Bank,  59  N.  T.  67,  17  "Am. 
Rep.  305.  See,  also,  Security  Bank  of  New  York  v.  National  Bank 
of  tlie  Republic,  67  N.  Y.  4.58,  23  Am.  Rep.  129;  Continental  Nat. 
Bank  v.  Metropolitan  Nat.  Bank,  107  111.  App.  455;  Parke  v.  Roser, 
67  Ind.  500,  33  Am.  Rep.  102. 

Where  a  bank  negligently  certified  a  raised  check,  and  paid  it  to 
a  bank  with  which  it  had  been  deposited,  and  which  in  reliance 
thereon  paid  the  depositor,  the  first  bank  could  not  thereafter  re- 
cover the  amount  from  the  second,  whose  right  to  retain  the  money 
rested,  not  in  the  mere  certification,  l)nt  on  the  estoppel  arising  from 
the  subsequent  acts  of  the  first  bank,  and  from  its  negligence  until 
it  was  too  late  to  protect  the  second  bank  or  itself  from  loss.  Con- 
tinental Nat.  Bank  of  New  York  v.  Tradesmen's  Nat.  Bank  of  New 
York,  173  N.  Y.  272,  65  N.  E.  1108.  See  "Banks  and  Banking:'  Dec. 
Dig.  (Key  No.)  §  145;  Cent.  Dig.  §§  419-433. 

17  7  Negotiable  Instruments  Law,  §  187. 


13G  CHECKS  (Ch.  3 

acceptor  by  accepting  the  instrument  engages  that  he  will 
pay  it  according  to  the  tenor  of  his  acceptance,  and  admits: 
(1)  the  existence  of  the  drawer,  the  genuineness  of  his  sig- 
nature, and  his  capacity  and  authority  to  draw  the  instrument ; 
and  (2)  the  existence  of  the  payee  and  his  then  capacity  to  in- 
dorse." ^'^ 

By  certification  the  bank  does  not  admit  the  genuineness  of 
indorsement.^'® 

Liability  of  Dravjer  and  Indorsers 

By  asking  for  and  receiving  the  bank's  certification,  instead 
of  payment,  the  holder  of  a  check,  as  has  been  explained,  nec- 
essarily discharges  the  drawer  ^^°  and  any  indorsers  of  the 


17  8  Negotiable  Instruments  Law,  §  62. 

It  was  assumed  by  tbe  late  Dean  Ames  that,  by  virtue  of  the  pro- 
vision that  the  acceptor  engages  to  pay  the  instrument  "according 
to  the  tenor  of  his  acceptance,"  the  Negotiable  Instruments  Law 
has  changed  the  former  rule,  for  the  better,  so  that  an  acceptor  of  a 
bill,  or  a  bank  certifying  a  check,  must  pay  to  the  innocent  holder 
the  amount  called  for  by  the  instrument  at  the  time  of  acceptance  or 
<;ertification,  even  though  the  amount  has  been  raised.  14  Harv.  Law 
Rev.  242. 

In  view  of  the  express  provision  that  the  acceptor  admits  the  gen- 
uineness of  the  drawer's  signature,  without  any  provision  that  he 
admits  the  genuineness  of  the  body  of  the  instrument,  this  may, 
perbaps,  be  open  to  doubt.  Perhaps  this  result  is  effected,  to  a 
limited  extent,  by  section  124,  which  provides  that  "when  an  instru- 
ment has  been  materially  altered  and  is  in  the  hands  of  a  holder  in 
due  course,  not  a  party  to  the  alteration,  he  may  enforce  payment 
thereof  according  to  the  original  tenor."  When  the  drawer  would  be 
liable  on  the  check  to  this  extent,  it  seems  that  to  this  extent  the 
bank  would  be  entitled  to  charge  the  drawer's  account  if  it  paid  the 
check,  and  that  consequently  to  this  extent  it  should  be  liable  to  an 
innocent  holder  upon  a  check  which  had  been  raised  before  certifica- 
tion. 

"0  First  Nat.  Bank  of  Chicago  v.  Northwestern  Nat.  Bank,  152  111. 
200,  38  N.  E.  739,  20  L.  R.  A.  2S9,  43  Am.  St.  Rep.  247.  -See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  l.',5;  Cent.  Dig.  §§  .'fl9-.'f33. 

180  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343,  345,  24  L.  Ed.  229; 
Essex  County  Nat.  Bank  v.  Bank  of  Montreal,  7  Biss.  193,  Fed.  Cas. 


§§38-39)  CERTIFIED   CHECKS  137 

check.^^^  On  principle,  it  seems  that  the  result  should  be  the 
same  where  the  certification  is  procured  by  the  drawer  before 
delivery  of  the  check  ;^®-  but,  although  there  is -s^wie  authority 
in  support  of  this  view,^**^  the  decisions  have  been  that  the 
drawer  is  not  discharged  where  he  has  himself  procured  the 
certification  before  delivery  of  the  check.^^*  Such  appears 
to  be  the  rule  under  the  Negotiable  Instruments  Law,  which 
provides :    "Where  the  holder  of  a  check  procures  it  to  be  ac- 

Xo.  4,532 ;  National  Commercial  Bank  v.  Miller,  77  Ala.  168,  54  Am. 
Kep.  50;  Metropolitan  Nat.  Bank  of  Chicago  v.  Jones,  137  111.  634, 
27  N.  E.  533,  12  L.  R.  A,  492,  31  Am.  St.  Rep.  403 ;  Miuot  v.  Russ,  156 
:\Ias.s.  458^  31  N.  E.  489,  16  L.  R.  A.  510.  32  Am.  St.  Rep.  472;  Tom- 
linson  v.  National  German  American  Bank,  73  Minn.  117,  75  N.  W. 
1028 ;  First  Nat.  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350,  11  Am> 
Rep.  708;  Freund  v.  Importers"  &  Traders'  Nat.  Bank,  76  N.  Y.  3.52; 
French  v.  Irwin,  4  Baxt.  (Tenn.)  401,  27  Am.  Rep.  7G9.  See  "Bills- 
and  Notes."  Dec.  Dig.  {Key  No.)  §  7,37;  Cent.  Dig.  §  1Z80. 

181  First  Nat.  Bank  of  Detroit  v.  Currie,  147  Mich.  72,  110  N.  W. 
499,  9  L.  R.  A.  (N.  S.)  698,  118  Am.  St.  Rep.  537.  See  "Bills  and 
Notes,"  Dec.  Dig.  {Key  No.)  §§  301,  J,OJ,,  7/37;  Ce7it.  Dig.  §  7i7y2, 
1275-1280. 

182  The  argument  is  strongly  presented  by  Francis  B.  Jones,  6 
Harv.  I^w  Rev.  138. 

183  See  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343,  345,  24  L.  Ed. 
229.  See  "Bills  and  Notds,"  Dec.  Dig.  (Key  No.)  §  1,37;  Cent.  Dig.  §| 
1275-1280. 

184  Larson  v.  Breene,  12  Colo.  480,  21  Pac.  498;  Bickford  v.  First 
Nat.  Bank  of  Chicago,  42  111.  2.38,  89  Am.  Dec.  436 ;  Rounds  v.  Smith, 
42  111.  245;  Brown  v.  Leckie,  43  111.  497;  Born  v.  First  Nat.  Bank, 
123  Ind.  78,  24  N.  E.  173,  7  L.  R.  A.  442,  18  Am.  St.  Rep.  312 ;  Minot 
V.  Russ,  156  Mass.  4.58,  31  N.  E.  489,  16  L.  R.  A.  510,  32  Am:  St.  Rep. 
472 ;  First  Nat.  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350.  353,  11 
Am.  Rep.  70S ;  Andrews  v.  German  Nat.  Bank,  9  Heisk.  (Tenn.)  211, 
24  Am.  Rep.  300. 

Though  the  payee  refuses  to  accept  the  check  without  certification, 
if  the  drawer  has  it  certified  before  delivering  it,  the  drawer  is  not 
discharged.  Randolph  Nat.  Bank  v.  Hornblower,  160  Mass.  401,  35 
N.   E.  850. 

An  indorser  is  not  discharged  where  he  procures  certification.  Mu- 
tual Nat.  Bank  v.  Rotge,  28  La.  Ann.  933.  2G  Am.  Rep.  126.  See 
"Bills  and  Notes."  Dec.  Dig.  (Key  No.)  S  .'/.'?7;  Cent.  Dig.  §§  1275-1280. 


138  CHECKS  (Ch.*3 

cepted  or  certified,  the  drawer  and  indorsers  are  discharged 
from  liability  thereon."  ^^° 
Form  of  Certification 

At  common  law  parol  acceptances  of  bills  of  exchange  were 
sustained,  and  some  cases  have  held  that  a  verbal  promise  by 
the  bank  to  pay  the  check  operates  as  acceptance,  though  not 
as  the  equivalent  of  certification.^^®  Where  such  parol  accept- 
ances have  been  sustained,  the  rule  has  been  confined  to  cases 
where  the  bank  has  funds  of  the  drawer  in  its  hands,  upon  the 
ground  that  otherwise  the  promise  would  be  within  the  statute 
of  frauds,  as  being  a  promise  to  answer  for  the  debt  of  an- 
other, while  if  the  bank  had  funds  its  promise  would  be  to 
pay  its  own  debt  to  the  drawer,  the  owner  of  the  funds,  and 
would  be  based  upon  consideration.^^'  In  several  cases  it 
has  been  held,  upon  no  basis  of  principle,  that  if  a  bank  pays 
a  check  upon  an  unauthorized  indorsement,  and  charges  the 
amount  to  the  drawer's  account,  the  bank  in  efi:'ect  accepts  or 
certifies  the  check  in  favor  of  the  true  holder.^^*     In  recent 


18  5  Xegotiable  Instruments  Law,  §  188.  Cf.  section  185;  Cullinau 
v.  Union  Surety  &  Guaranty  Co.,  79  App.  Div.  409,  80  N.  Y.  Supp.  58. 

See,  also,  the  following  cases,  where  certification  was  at  request 
of  the  holder:  Times  Square  Automobile  Co.  v.  Rutherford  Nat. 
Bank,  77  N.  J.  Law,  649,  73  Atl.  479,  134  Am.  St.  Rep.  811 ;  St.  Regis 
Paper  Co.  v.  Tonawanda  Co.,  107  App.  Div.  90,  94  N.  Y.  Supp.  94G ; 
Dunn  V.  Whalen,  120  App.  Div.  729,  105  N.  Y.  Supp.  588;  Blake  v. 
Hamilton  Dime  Savings  Bank  Co.,  79  Ohio  St.  189,  87  N.  E.  73,  20 
L.  R.  A.  (N.  S.)  290,  128  Am.  St.  Rep.  GS4.  See  ''Bills  and  Notes," 
Dec.  Dig.  {Key  No.)  §  Jf37 ;  Cent.  Dig.  §§  1215-1280. 

186  See  Espy  v.  First  Nat.  Bank,  18  Wall.  604,  21  L.  Ed.  947; 
Farmers'  &  Merchants'  Bank  v.  Dunbier,  32  Neb.  487,  49  N.  W.  376 ; 
Barnet  v.  Smith,  30  N.  H.  256,  64  Am.  Dec.  290.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  1^5;  Cent.  Dig.  §  ^ipi/a  ;  "Bills  and 
Notes,"  Dec.  Dig.  (Key  No.)  §§  68,  69;  Cent.  Dig.  §§  110-119. 

18T  Morse  v.  Massachusetts  Nat.  Bank,  Holmes,  209,  Fed.  Cas.  No. 
9,857;  Leach  v.  Hill,  106  Iowa,  171,  76  N.  W.  G67.  See  ''Bills  and 
Notes,"  Dec.  Dig.  {E^ey  No.)  §§  68,  69;  Cent.  Dig.  §§  110-119;  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  IJfo;  Cent.  Dig.  §  419^2- 

188  Seventh  Nat.  Bank  v.  Cook,  73  Pa.  483,  13  Am.  Rep.  751;  Dodge 


§§  38-39)  CERTIFIED   CHECKS  139 

times  it  has  been  very  generally  provided  by  statute  that  the 
acceptance  of  a  bill  of  exchange  must  be  in  writing,  and  such 
statutes  have  been  construed  as  api^licable  to  cli^cjcs.^**"  Under 
the  Negotiable  Instruments  Law,  the  certification  or  acceptance 
of  a  check  "must  be  in  writing  and  signed  by  the  drawee,"  ^°" 


V.  National  Exchange  Bank,  20  Ohio  St.  234,  5  Am.  Rep.  648;  Id.,  30 
Qhio  St.  1 ;  Pickle  v.  Muse,  88  Tenn.  380,  12  S.  W.  910,  7  L.  R.  A. 
93,  17  Am.  St,  Rep.  900.  Contra:  First  Nat.  Bank  v.  Whitman,  94 
U.  S.  343,  24  L.  Ed.  229 ;  Sims  v.  American  Nat.  Bank  of  Ft.  Smith 
(Ark.)  135  S.  W.  356.  See  "Bills  and  Notefi:'  Dec.  Dig.  {Key  No.) 
§§  68,  69;  Cent.  Dig.  §§  110-119;  ''Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  1J,5;  Cent.  Dig.  §  ^iPVo. 

189  Garrettson  v.  North  Atchison  Bank  (C.  C.)  47  Fed.  8G7;  Eakin 
V.  Citizens'  State  Bank,  67  Kan.  .338,  72  Pac.  874;  Duncan  v.  Berlin, 
60  N.  Y.  151 ;  National  State  Bank  of  Camden  v.  Lindeman,  161  Pa. 
199,  28  Atl.  1022.  See  "Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §§  6S, 
69;  Cent.  Dig.  §§  110-119;  "Banks  and  Banking."  Dec.  Dig.  (Key  No.) 
§§  1J,0,  U5;  Cent.  Dig.  §§  S86-3SS,  J,19y2. 

190  Negotiable  Instruments  Law,  §  1,32.  See,  also,  sections  185, 
187-189;  Van  Buskirk  v.  State  Bank  of  Rocky  Ford,  35  Colo.  142, 
S3  Pac.  778,  117  Am.  St.  Rep.  182 ;  Baltimore  &  O.  Ry.  Co.  v.  First 
Nat.  Bank,  102  Va.  753,  47  S.  E.  837. 

Section  137  provides:  "Where  a  drawee  to  whom  a  bill  is  de-f 
livered  for  acceptance  destroys  the  same,  or  refuses  within  24  hours 
after  such  delivery,  or  within  such  other  period  as  the  holder  may 
allow,  to_return  the  bill  accepted  or  nonaccepted  to  the  holder,  he 
will  be  deemed  to  have  accepted  the  same."  It  has  been  held  that, 
while  section  132  abolishes  verbal  and  implied  acceptance,  it  does 
not  affect  a  so-called  "constructive"  acceptance  under  section  137, 
and  that,  where  a  drawee  bank  failed  to  return  checks  sent  to  it  for 
payment  within  24  hours  after  their  delivery  to  it  by  a  collecting 
bank,  the  drawee  must  be  deemed  to  have  accepted  them,  and  was 
liable  to  the  holder  thereon.  Wisner  v.  First  Nat.  Bank  of  Gallitzin, 
220  Pa.  21,  68  Atl.  955,  17  L.  R.  A.  (N.  S.)  1266.  See,  also.  State 
Bank  v.  Weiss,  46  Misc.  Rep.  93.  91  N.  Y.  Supp.  276. 

These  cases  are  open  to  the  criticism  that  section  137  by  its  ex- 
press terms  applies  only  to  a  bill  delivered  for  "acceptance,"  and  does 
not  apply  to  a  bill  delivered  for  payment.  See  Westberg  v.  Chicago 
Lumber  &  Coal  Co.,  117  Wis.  589,  94  N.  W.  572.  Indeed,  the  ap- 
plicability of  this  section  at  all  to  a  check,  which  is  not  presentable 


140  CHECKS  (Ch.  3 

and  there  are  now  few  jurisdictions,  if  there  are  any,  where 
a  parol  acceptance  or  certification  would  be  good.  Usually 
the  certification  is  iq  the  form  of  the  word  "good."  Some- 
times the  word  "certified"  is  used.  Certification  may  be  ac- 
complished by  any  similar  words,  which  indicate  a  statement 
that  the  drawer  has  funds  in  the  bank  applicable  to  the  payment 
of  the  check,  and  that  the  bank  will  so  apply  them.^^^ 

Poifer  and  Authority  to  Certify 

The  certification  of  checks  is  a  power  incident  to  the  business 
of  banking.^®-  It  is  within  the  power  of  a  national  bank,  al- 
though certification  when  the  funds  are  insufficient  is  prohibit- 
ed.^''^ 

for  acceptaoce,  in  the  sense  that  it  is  dishonored  by  nonacceptance, 
is  questionable. 

Under  former  statutes,  which  were  substantially  the  same  as  sec- 
tion 137,  it  has  been  held  that  mere  retention  was  not  the  equivalent 
of  refusal  to  return.  See  Matteson  v.  Moulton,  11  Hun  (N.  Y.)  268 ; 
Id..  79  N.  T.  627;  Dickinson  v.  Marsh,  57  Mo.  App.  566;  St.  Louis 
Southwestern  R.  Co.  v.  James,  78  Ark.  490,  95  S.  W.  804.  See  ''Bills 
and  Notes,"  Dec.  Dig.  {Key  No.)  §§  68,  69;  Cent.  Dig.  §§  110-119; 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  UO,  U5 ;  Cent.  Dig.  §§ 
386-288,  WV2- 

191  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343,  24  L.  Ed.  229,  per 
Hunt,  J.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  ijo; 
Cent.  Dig.  §§  386-388.  J1I9V2. 

192  See  Merchants'  Nat.  Bank  v.  State  Bank,  10  Wall.  604,  647,.  19 
L.  Ed.  1008.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  Uo; 
Cent.  Dig.  §§  .^i5-'/33. 

193  Merchants'  Nat.  Bank  of  Wheeling  v.  First  Nat.  Bank  of 
Wheeling,  7  W.  Va.  544 ;  post,  p.  405. 

Rev.  St.  U.  S.  §  5208  (U.  S.  Comp.  St.  1901,  p.  3497),  which  makes  it 
unlawful  for  any  national  bank  to  certify  any  check,  unless  the 
drawer  has  on  deposit  money  sufficient  to  meet  the  same,  but  de- 
clares that  a  check  so  certified  shall  be  a  valid  obligation  against 
the  bank,  does  not,  as  between  the  parties,  invalidate  a  pledge  of 
bonds  made  by  the  drawer  of  such  checks  to  secure  the  indebtedness 
thereby  created  from  him  to  the  bank,  when  the  transaction  has  been 
completed  by  payment  of  the  checks.  Thompson  v.  Saint  Nicholas 
Nat.  Bank,  140  U.  S.  240,  13  Sup.  Ct.  66,  36  L.  Ed.  056.  See  "Banks 
and  Bankinf/."  Dec.  Dig.  (Key  No.)  §  U5;  Cent.  Dig.  §§  ^19--',33. 


§§  38-39)  CERTIFIED   CHECKS  141 

Certification  is  within  the  power  or  authority  of  the  presi- 
dent ^°*  of  a  bank,  or  of  the  cashier,^"^  and  generally  of  the 
teller.^^^  While  an  officer  who  certifies  a  check"**where  the 
drawer  has  insufficient  funds  exceeds  hrs  authority,  under  the 
general  rule  of  agency  the  certification,  if  by  a  proper  officer, 
binds  the  bank  as  against  a  bona  fide  holder.^"'  It  is  otherwise 
if  the  officer  has  no  general  authority  to  certify  at  all.^®^  Ob- 
viously the  certification  of  a  postdated  check  is  improper,  and 
such  certification  generally  carries  notice  that  the  certification 
was  unauthorized.^''^ 

13*  See  Claflin  v.  Farmers'  &  Citizens'  Bauli,  25  N.  Y.  293;  post. 
p.  315.  See  "Banks  and  Banking;'  Dec.  Dig.  {Kerj  No.)  §§  i09,  1^5; 
Cent.  Dig.  §§  25J,-260,  Jil9-.'i33. 

195  Coolie  V.  State  Nat.  Banlc,  52  N.  Y.  96,  11  Am.  Rep.  667.  Cf. 
Merchants'  Nat.  Bank  v.  State  Nat.  Banli.  10  Wall.  604,  19  L.  Ed. 
lOOS;  post,  p.  321.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.) 
§§  109,  I'iS;  Cent.  Dig.  §§  25.>t-260,  ^W-.m. 

196  Farmers'  &  Mechanics'  Bank  of  Kent  County  v.  Butchers"  & 
Drovers'  Bank,  28  N.  Y.  425;  Continental  Nat.  Bank  v.  National 
Bank  of  Commonwealth.  50  N.  Y.  575.  Contra :  Mussey  v.  President, 
etc..  of  Eagle  Bank,  9  Mete.  (Mass.)  306;  post,  p.  327.  See  ''Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §§  109,  11,5;  Cent.  Dig.  §§  2oJ,-260, 
Jtl9-m.  ' 

197  Farmers'  «&  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank,  14 
N.  Y.  023 ;  Id.,  16  N.  Y.  125,  69  Am.  Dec.  678 ;  Farmers'  &  Mechanics' 
Bank  of  Kent  County  v.  Butchers'  &  Drovers'  Bank,  28  N.  Y.  425;' 
Cooke  V.  State  Nat.  Bank,  52  N.  Y.  100,  11  Am.  Rep.  607. 

This  is  so,  even  where  a  statute-  makes  it  unlawful  to  certify  a 
check  in  the  absence  of  funds.  Union  Trust  Co.  v.  Preston  Nat. 
Bank,  130  ^lich.  400,  99  N.  W.  399,  112  Am.  St.  Rep.  370 ;  First  Nat. 
Bank  v.  Union  Trust  Co.,  158  Mich.  94,  122  N.  W.  547,  133  Am.  St. 
Rep.  362. 

Where  a  check  on  its  face  showed  that  the  president,  who  falsely 
certified  it,  was  attempting  to  use  his  official  character  for  his  own 
benefit,  no  one  could  recover  as  a  bona  fide  holder.  Claflin  v.  Farm- 
ers' &  Citizens'  Bank,  25  N.  Y.  293.  See  "Banks  and  Banking;'  Dec. 
Dig.  (Key  No.)  §§  109,  1J,5 ;  Cent.  Dig.  §§  253-260,  J,W-.'i21. 

198  Mussey  v.  President,  etc.,  of  Eagle  Bank,  9  Mete.  (Mass.)  306; 
Pope  v.  Bank  of  Albion,  57  N.  Y.  126.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  1J,5;  Cent.  Dig.  §§  ^19-^21. 

199  See  Clarke  Nat.  Bank  v.  Bank  of  Albion.  52  Barb.  (N.  Y.)  592; 


142  CHECKS  (Ch.  3 

Certified  Notes 

Where  a  note  is  by  its  terms  payable  at  a  bank,  the  note 
may  be  certified  in  the  same  manner  and  with  the  same  effect 
as  a  check,^"*'  at  least  in  jurisdictions  where  the  rule  prevails 
that  such  a  note  confers  authority  on  the  bank  to  apply  the 
maker's  deposit  to  its  payment. -°^ 

Pope  V.  Bank  of  Albion,  57  N.  T.  126.  Cf.  Smith  v.  Field,  19  Idaho, 
558,  114  Pac.  668.  See  "Banks  and  Banking"  Dec.  Big.  {Key  No.)  § 
145;  Cent.  Dig.  §§  Jfl9-m. 

200  Riverside  Bank  v.  First  Nat.  Bank,  74  Fed.  276,  20  C.  C.  A. 
181 ;  Meads  v.  Merchants'  Bank  of  Albany,  25  K  Y.  143,  82  Am.  Dec. 
331.  affirming  Irving  Bank  v.  Wetherald,  34  Barb.  323.  See  2  Ames, 
ras.  Bills  &  Notes,  802. 

The  certification  cannot  be  rescinded,  because  made  under  a  mis- 
apprehension as  to  the  sufficiency  of  the  maker's  account.  Riverside 
Bank  v.  First  Nat.  Bank,  supra.  But  see  Second  Nat.  Bank  of  Balti- 
more V.  Western  Nat.  Barjk  of  Baltimore,  51  Md.  128,  34  Am.  Rep. 
300;  Irving  Bank  v.  Wetherald,  36  N.  Y.  335;  National  Park  Bank 
of  New  York  v.  Steele  &  Johnson  Mfg.  Co.,  58  Hun,  81,  11  N.  Y.  Supp. 
538.  Sec  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  145;  Cent. 
Dig.  §§  419-433. 

2  01  Ante,  p.  58. 


§  40)  PAYMENT  OF   CHECKS  143 

CHAPTER  IV  ^^ 

PAYMENT  OF  CHECKS 

40.  Duty  of  Bank  to  Depositor. 

41.  Rights  of  Banlv  upou  Payment — In  General. 

42.  Revocation  of  Order. 

43.  Forged  Checks — Signature  of  Drawer  Forged. 

44.  Altered  Check. 

45.  Forged  Indorsement. 

DUTY  OF  BANK  TO  DEPOSITOR 

40.  It  is  the  duty  of  a  bank  on  which  a  check  is  drawn  by 
a  depositor  to  pay  it  on  presentment,  if  he  has  on 
deposit  sufficient  funds  to  his  credit,  and  for  a  re- 
fusal so  to  do  the  bank  is  Uable  to  him  for  such 
damages  as  are  the  natural  and  reasonable  conse- 
quences of  the  dishonor  of  the  check. 

Duty  of  Bank  to  Pay — In  General 

When  a  bank  receives  funds  on  deposit,  by  reason  of  the 
customs  and  nature  of  the  business  it  impliedly  contracts  with 
the  depositor  that  it  will  pay  checks  drawn  by  him  to  the 
amount  of  the  deppsit,  and  a  refusal  to  honor  his  check  when 
there  are  sufficient  funds  is  a  breach  of  contract,  for  which 
an  action  for  damages  lies.^  And  for  such  refusal  he  may 
also  suie  in  tort.^     The  liability  in  tort,  although  its  basis  is 


1  An  action  for  damages  for  refusal  to  honor  a  check  is  to  be  dis- 
tinguished from  a  mere  action  to  recover  a  deposit.  First  Nat.  Bank 
of  Tamaqua  v.  Shoemaker,  117  Pa.  94,  11  Atl.  304,  2  Am.  St.  Rep.  649 ; 
ante,  p.  90.  See  "Banks  and  Banking, ''  Dec.  Dig.  {Key  No.)  §  143; 
Cent.  Dig.  §  414. 

2  Marzetti  v.  Williams,  1  B.  &  Ad.  415 ;  Citizens'  Nat.  Bank  of 
Davenport  v.  Importers'  &  Traders'  Bank  of  New  York,  119  N.  Y. 
195,  23  N.  E.  540;    National  Bank  of  New  Jersey  v.  Berrall,  70  N. 


144  PAYMENT   OF  CHECKS  (Ch.  4 

not  clear,  appears  to  rest  upon  a  slander  of  credit,  in  that  the 
wrongful  act  of  the  banker  in  refusing  to  honor  the  check 
imports  insolvency,  dishonesty,  or  bad  faith  to  the  drawer ;  ^ 
but  in  some  cases  the  liability  appears  to  be  based  upon  the 
ground  that  the  refusal  is  the  violation  of  a  duty  imposed  by 
public  policy  upon  banks  as  institutions  of  a  quasi  public  char- 
acter, chartered  for  the  purpose,  inter  alia,  of  safely  keeping 
the  money  of  individuals  and  corporations.*  Where  the  lia- 
bility is  made  to  rest  upon  a  slander  of  credit,  it  is  sometimes 
confined  to  cases  where  the  drawer  of  the  check  is  a  "mer- 
chant" or  "trader,"  on  the  ground  that  the  dishonor  of  his 
check  is  an  effectual  way  of  slandering  him  in  his  trade ;  ^  but 
other  cases  hold  that  the  terms  are  not  to  be  construed  in  a 
restrictive  sense,  and  include  any  person  who  is  engaged  in 
business  and  whose  credit  is  thus  necessarily  injured.^    Where 

J.  Law,  757,  58  Atl.  189,  66  L.  R.  A.  599,  103  Am.  St.  Rep.  821.  See 
"Batiks  and  Banlcing,"  Dec.  Dig.  {Key  No.)  §  US;  Cent.  Dig.  §  W- 

3  Rolin  V.  Steward.  14  C.  B.  .595 ;  Svendsen  y.  State  Bank  of  Du- 
luth,  64  Minn.  40.  65  y.  W.  lOSC.  31  L.  R.  A.  5.52,  .58  Am.  St.  Rep. 
.522;  J.  M.  James  Co.  v.  Coutinental  Nat.  Bank,  105  Tenn.  1,  .58  S. 
W.  261,  51  L.  R.  A.  2.55,  80  Am.  St.  Rep.  857.  See,  also,  Hanua  v. 
Drovers'  Nat.  Bank,  92  111.  App.  611 ;  Id.,  194  III.  252,  62  N.  E.  556. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  1^3;    Cent.  Dig.  § 

m. 

4  Patterson  v.  Marine  Nat.  Bank,  130  Pa.  419,  18  Atl.  632,  17  Am. 
St.  Rep.  778.  See,  also,  American  Nat.  Bank  v.  Morey,  113  Ky.  857, 
69  S.  W.  759,  58  L.  R.  A.  956,  101  Am.  St.  Rep.  379 ;  Id.  (Ky.)  SO  S. 
W.  157. 

See  discussion  by  Professor  Huffcut,  2  Columb.  L.  Rev.  193.  This 
theory  overlooks  the  fact  that  the  liability  would  be  the  same  in 
the  case  of  a  private  banker,  as  well  as  that  banks  are  under  no 
general  duty  to  receive  deposits.  Ante,  p.  15.  See  15  Harv.  Lav/ 
Rev.  757.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  l-'i3; 
Cent.  Dig.  §  414. 

5  See  cases,  ante,  note  3. 

6  Peabody  v.  Citizens"  State  Bank  of  St.  Charles,  98  Minn.  302,  108 
N.  W.  272;  Davis  v.  Standard  Nat.  Bank,  50  App.  Div.  210,  63  N. 
Y.  Supp.  764,  See  "Banks  and  Banking,"  Dec.  Dig.  (Key.  No.)  §  l-^iS; 
Cent.  Dig.  §  41Jf. 


§  40)  DUTY    OF    BANK    TO    DEPOSITOR  145 

the  liability  is  made  to  rest  upon  the  broader  ground  of  a  duty 
imposed  by  public  policy,  no  limitation  arising  from  the  char- 
acter of  the  drawer  is  imposed.  In  a  recent  ...Massachusetts 
case,  the  court  prefers  to  base  the  cause  of  action  solely  upon 
contract,  and  says :  "The  cause  of  action,  though  sometimes 
spoken  of  as  in  the-  nature  of  a  tort,  arises  out  of  the  breach 
of  the  contract^  implied  by  the  relation  of  the  parties,  that  the 
banker  will  honor  the  checks  of  the  depositor."  '' 

Damages  for  Wrongful  Dishonor 

Where  the  views  as  to  the  nature  of  the  liability  are  so  di- 
vergent, the  courts  are  naturally  not  .in  accord  as  to  the  rules 
of  damages,  although  they  agree  that  the  plaintiff  may,  upon 
proper  pleading  and  proof,  recover  any  damages  wdiich  are 
the  natural  and  reasonable  consequences  of  the  dishonor.  The 
rules  generally  prevailing  may  be  stated  as  follows:  If  the 
plaintiff  is  a  merchant  or  trader,  injury  to  his  credit  may  be 
inferred  .from  that  fact,  and  substantial  damages  may  be  re- 
covered, without  allegation  or  proof  of  special  damages ; 
while  if  the  plaintiff  is  not  a  trader,  only  upon  allegation  and 
proof  of  special  damages  may  substantial  damages  be  recover- 
ed, and  wathout  such  allegation  and  proof,  if  the  act  of  the 
bank  was  without  malice,  only  nominal  damages  may  be  re- 
.covered.*  On  the  other  hand,  upon  the  ground  that  the  re- 
fusal to  honor  a  check  is  necessarily  a  discredit  to  the  drawer, 

7  Wiley  V.  Bunker  Hill  Nat.  Bank,  183  Mass.  495,  67  N.  E.  655.  See, 
also,  Kleopfer  v.  First  Nat.  Bank,  65  Kan.  774,  70  Pac.  880.  See 
"Banks  and  Banlcing,"  Dec.  Dig.  (Key  No.)  §  143;  Cent.  Dig.  §  4i4- 

8  Roliu  V.  Steward,  14  C.  B.  595 ;  Third  Nat.  Bank  of  St.  Louis  v. 
Ober,  178  Fed.  678,  102  C.  C.  A.  178 ;  Schaffner  v.  Ehrman,  139  111. 
109,  28  N.  E.  917,  15  L.  R.  A.  134,  32  Am.  St.  Rep.  192 ;  Wiley  v.  Bun- 
ker Hill  Nat.  Bank,  183  Mass.  495,  67  N.  E.  655 ;  Burroughs  v.  Trades- 
men's Nat.  Bank,  87  Hun,  6,  33  N.  Y.  Supp.  864,  affirmed  1.j6  N.  Y. 
663,  50  N.  E.  1115 ;  T.  B.  Clark  Co.  v.  Mt.  Morris  Bank,  85  App.  Div. 
362,  83  N.  Y.  Supp.  447,  affirmed  181  N.  Y.  533,  73  N.  E.  1133 ;  J.  M. 
James  Co.  v.  Continental  Nat.  Bank,  105  Tenn.  1,  58  S.  W.  261,  51  L. 
R.  A.  255,  SO  Am.  St.  Rep.  857.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  1J,3;   Gent.  Dig.  §  J,1J,. 

Tiff.Bks.&P.— 10 


146  PAYMENT  OF   CHECKS  (Ch.  4 

some  cases  allow  substantial  damages  without  proof  of  special 
damages,  although  the  drawer  was  not  a  merchant  or  trader.^ 
The  damages  must  not  exceed  such  as  are  the  natural  and 
reasonable  consequences  of  the  breach  ;^*>  but  if  the  act  of 
the  bank  was  malicious,  damages  for  mental  suffering  may 
be  awarded. ^^ 
JVhen  Refusal  to  Pay  Wrongful 

Whether  a  refusal  to  honor  a  check  is  wrongful  depends 
upon  the  actual  state  of  the  account.^^  The  bank  may  refuse 
to  pay  if  there  are  not  sufficient  funds  to  the  credit  of  the  de- 
positor after  offsetting  any  indebtedness  due  from  him,^^  but 
not  an  indebtedness  which  has  not  matured.^*    If  the  balance 

9  Atlanta  Nat.  Bank  v.  Davis,  96  Ga.  334.  23  S.  E.  190,  51  Am.  St. 
Rep.  139;  Hilton  v.  Jesup  Banking  Co.,  128  Ga.  30,  57  S.  E.  78,  11 
L.  R.  A.  (N.  S.)  224;  Patterson  v.  Marine  Nat.  Bank,  130  Pa.  419, 
18  Atl.  632,  17  Am.  St.  Rep.  778 ;  Columbia  Nat,  Bank  v.  MacKnight, 
29  App.  D.  C.  580;  Lorick  v.  Palmetto  Bank  &  Trust  Co.,  74  S.  C. 
185,  54  S.  E.  200.  See  Metropolitan  Supply  Co.  y.  Garden  City  Bank- 
ing &  Trust  Co.,  114  111.  App.  318.  See  "Banks  and  BanJcing,"  Dec. 
Dig.  (Key  No.)  §  1J,3;  Cent.  Dig.  §  J,U. 

10  American  Nat.  Bank  v,  Morey,  113  Ky,  857,  69  S.  W.  759,  58  L. 
R,  A.  956,  101  Am.  St.  Rep.  379;  Brooke  v.  Tradesmen's  Nat.  Bank, 
69  Hun,  202,  23  N,  Y.  Supp,  802;  Bank  of  Commerce  v,  Goos,  39 
Neb,  437,  58  N,  W,  84,  23  L,  R,  A,  190.  ^See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  1J,3;  Cent.  Dig.  §  m. 

11  Davis  V.  Standard  Nat.  Bank,  50  App.  Div.  210,  63  N.  Y.  Supp. 
764. 

As  to  exemplary  damages,  see  Wood  v,  American  Nat,  Bank,  100 
Va.  306,  40  S.  E.  931.  -See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§  IJiS;  Cent.  Dig.  §  JjU. 

12  American  Exchange  Nat.  Bank  v.  Gregg,  138  111.  596,  28  N.  E. 
839,  32  Am.  St.  Rep.  171.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  l.',S;  Cent.  Dig.  §  JflJ,. 

isGarnett  v.  McEwen,  L.  R.  8  Exch.  10;  Mt.  Sterling  Nat.  Bank 
V.  Green,  99  Ky.  262,  35  S.  W.  911,  32  L.  R.  A.  568,  Cf.  Callaham  v. 
Bank  of  Anderson,  69  S.  C.  374,  48  S.  E.  293;  ante,  p.  61.  See 
'•Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  134,  US;  Cent.  Dig.  §§ 
3o3-31Jt,  JflJf. 

14  Wiley  v.  Bunker  Hill  Nat.  Bank,  183  Mass.  495,  67  N,  E,  655; 
ante.  i>.  04.  s<r  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  iS4; 
rrnt.  Dig.  §§  353-51. ). 


§  40)  DUTY    OF    BANK    TO    DEPOSITOR  147 

is  not  sufficient  to  pay  the  check  in  full,  the  bank  is  not  re- 
quired to  make  part  payment,  for  it  is  entitled  to  possession  of 
the  check  as  a  voucher.^''  The  bank  is  entitled-«fco  a  reasona- 
ble time  after  presentment  of  a  check  in  which  to  ascertain  tire 
state  of  the  account,  but  after  the  expiration  of  a  reasonable 
time  it  will  be  liable  for  refusal  to  pay,  if  the  depositor's  funds 
were  sufficient.^''  If  a  check  is  by  its  terms  payable  only 
when  presented  through  a  designated  bank,  the  drawee  bank 
is  not  required  to  pay  the  check  when  presented  by  another 
bank.i" 

The  duty  and  authority  of  a  bank  to  pay  a  check  are  deter- 
mined by  countermand  of  payment  ^^  or  by  notice  of  the  de- 
positor's death^^  It  may  refuse  to  pay  if  it  has  been  notified 
that  the  money  belongs  to  another  than  the  depositor.^" 

15  In  re  Brown,  2  Story,  502,  Fed.  Cas.  No.  1,985,  per  Story,  J. 
See,  also,  Beauregard  v.  Knowltou,  156  Mass.  395,  31  N.  E.  389 ;  Mur- 
ray V.  Judah,  6  Cow.  (N.  Y.)  484. 

So  held  in  jurisdictions,  where  a  check  was  held  to  operate  as  an 
assignment  upon  presentment.  Bauli  of  Antigo  v.  Union  Trust  Co., 
149  111.  343,  36  N.  E.  1029,  23  L.  R.  A.  Oil ;  Henderson  &  Co.  v.  United 
States  Nat.  Bank,  59  Neb.  280.  80  N.  W.  898. 

It  has  been  said  that  the  bank  may,  if  it  wishes,  credit  the  amount 
of  the  deposit  on  the  check.  Dana  v.  Third  Nat.  Bank  in  Boston,  13 
Allen  (Mass.)  445,  90  Am.  Dec.  216;  Bromley  v.  Commercial  Nat. 
Bank,  9  Phlla.  (Pa.)  522.  See  "Banlcs  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  IS/,;  Cent.  Dig.  §§  353-37^. 

16  Marzetti  v.  Williams,  1  B.  &  Ad.  415;  Whitaker  v.  Bank  of  Eng- 
land, 1  C,  M.  &  R.  744.  See  ''Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  13-i;  Cent.  Dig.  §§  355-377/. 

17  So  held  where  a  check  drawn  on  a  bank  in  N.  was  stamped, 
"Payable  through  the  C.  banlv  of  V.  at  current  rate."  Farmers' 
Bank  of  Nashville  v.  Johnson,  King  &  Co.,  134  Ga.  486,  68  S.  E.  85, 
30  L.  R,  A.  (N.  S.)  697,  137  Amf  St.  Rep.  242.  See  "Banks  and  Bank- 
ing," Dee.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  308-JtOo. 

18  Post,  p.  152. 
18  Post,  p.  153. 

20  Hanna  v.  Drovers'  Nat.  Bank,  194  111.  2.'2.  62  N.  E.  556 ;  Pearce 
V.  Dill,  149  Ind.  136,  48  N.  E.  788.  See  ''Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §§  13S,  139;  Cent.  Dig.  §§  3S0-J,05. 


143  PAYMENT  OF   CHECKS  (Ch.  4 

RIGHTS  OF  BANK  UPON  PAYMENT 

41.  IN  GENERAL — Where  a  bank  pays  the  check  of  a  de- 

positor in  accordance  with  the  order  therein  con- 
tained, it  has  the  right  to  charge  the  payment  to 
his  account,  and  he  is  Hable  to  the  bank  for  any  de- 
ficiency if  his  deposit  was  less  than  the  amount 
paid.  Although  the  bank  has  paid  the  check  under 
the  mistaken  assumption  or  belief  that  the  deposit 
was  sufficient,  the  bank  cannot,  by  the  weight  of 
authority,  recover  back  the  money  from  the  payee 
upon  the  ground  of  mistake. 

42.  REVOCATION  OF  ORDER— The  duty  and  authority 

of  a  bank  to  pay  a  check  is  determined  by  coun- 
termand of  payment,  and  also  (it  seems)  by  notice 
of  the  drawer's  death. 

Payment  in  General 

Where  a  bank  pays  a  depositor's  check,  it  has,  of  course, 
the  right  to  deduct  the  amount  paid  from  the  amount  of  de- 
posits standing  to  his  credit.  And  while  it  is  under  no  obli- 
gation to  honor  his  check  if  he  has  not  sufficient  funds  to  his 
credit,  it  may  pay  the  check  if  it  sees  fit,  and  will  thereupon  be 
entitled  to  recover  from  him  the  amount  of  the  overdraft.-^ 

To  constitute  payment,  so  as  to  entitle  the  bank  to  charge 
the  depositor  with  the  amount,  it  is  not  necessary  that  it  shall 
have  actually  made  the  payment  in  cash.  If  the  holder  of  the 
check  consents  to  receive  credit  with  the  bank,  instead  of 
money,  it  is  enough.^^    Or  if  at  his  request  the  bank  certifies 

21  Ante,  p.  82. 

2  2  Second  Nat.  Bank  of  New  Albany  v.  Gibboney,  43  Ind.  App.  492, 
87  N.  E.  iriG4 ;  Albers  v.  Commercial  Bank,  S5  Mo.  173,  55  Am.  Rep. 
355;  Consolidated  Nat.  Bank  of  New  York  v.  First  Nat.  Bank  of 
Middletown,  12f)  App.  Div.  538,  114  N.  Y.  Supp.  308  (cf.  Republic  Life 
Ins.  Co.  V.  Hud.son  Trust  Co.,  130  App.  Div.  618,  115  N.  Y.  Supp. 
n04>:    American  Nat.  Bank  of  Nashville,  Tenn..  v.  Miller,  185  Fed. 


§§  41-42)  RIGHTS   OF    BANK    UPON    PAYMENT  149 

the  check,  the  transaction  operates  as  payment  so  far  as  the 

drawer  is  concerned.-^ 

Payment  Under  Mistake  as  to  Sufficiency  of  Dep&^ 

If  the  bank  pays  a  check  under  the  mistaken  assumption  or 
belief  that  the  drawer's  deposit  is  sufficient,  by  the  weight  of 
authority  the  bank  must  nevertheless  look  to  him  alone  for 
repayment,  and  cannot  recover  back  the  amount  from  the 
payee  upon  the  ground  of  a  mistake  of  fact.-*  The  payment 
of  a  check  under  such  circumstances  to  a  bona  fide  holder,  as 
between  him  and  the  bank,  is  a  finality.-^  The  rule  is  per- 
haps most  satisfactorily  supported  on  the  ground  of  com- 
mercial convenience,  which  requires  that  the  drawee  bank 
should  be  the  place  of  final  settlement,  where  mistakes  should 

338,  107  C.  C.  A.  456.  See,  also,  Montgomery  County  v.  Cochran,  126 
Fed.  456,  62  C.  C.  A.  70 ;  Bartley  v.  State,  5.3  Neb.  310,  73  N.  W.  744. 

As  to  checks  presented  through  clearing  house,  post,  p.  179.  See 
"Banks  and-  Banking,"  Dec.  Dig.  {Key  Xo.)  §  l-'fl;  Cent.  Dig.  §§  3^7, 
3-',S. 

2  3  Ante,  p.  1.32. 

24  Chambers  v.  Miller,  13  C  B.  X.  S.  125 ;  Pollard  v.  Bank  of  Eng- 
land. L.  R.  6  Q.  B.  623 ;  River.side  Bank  v.  First  Nat.  Bank,  74  Fed. 
276,  20  C.  C.  A.  ISl ;  First  Nat.  Bank  v.  Burkhardt.  100  U.  S.  6S6,  25 
L.  Ed.  766 ;  City  Nat.  Bank  of  Selma  -v.  Burns,  68  Ala.  267,  44  Am. 
Rep.  13S;  First  Nat.  Bank  of  Denver  v.  Devenish,  15  Colo.  229,  25 
Pac.  177,  22  Am.  St.  Rep.  394 ;  Manufacturers'  Nat.  Bank  v.  Swift, 
70  Md.  515,  17  Atl.  336,  14  Am.  St.  Rep.  381;  National  Exchange 
Bank  v.  Ginn  &  Co.,  114  Md.  181,  78  Atl.  1026,  33  L.  R.  A.  (N,  S.)  963 ; 
Bank  of  State  v.  Hull,  Dud.  (S.  C.)  259;  Spokane  &  Eastern  Trust 
Co.  T.  Huff  (AVash.)  115  Pac.  SO,  33  L.  R.  A.  (N.  S.)  1023.  See  ''Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §§  1J,2,  1.50;  Cent.  Dig.  §§  .^10- 
JflS,  40-5-464 V2- 

2  5  So  where  the  bank  pays  after  countermand  by  the  drawer.  Na- 
tional Bank  of  New  Jersey  v.  Berrall,  70  N.  J.  Law,  757.  58  Atl.  1S9, 
66  L.  R.  A.  599,  103  Am.  St.  Rep.  821.  Cf.  Northampton  Nat.  Bank 
V.  Smith,  169  Mass.  281,  47  N.  E.  1009,  61  Am.  St.  Rep.  283. 

It  is  otherwise  if  the  payee  Is  not  a  bona  fide  holder.  Stark- 
weather V.  Emerson  Mfg.  Co.,  132  Iowa,  266,  109  N.  W.  719 ;  James 
River  Nat.  Bank  of  Jamestown  v.  Weber  (N.  D.)  124  N.  W.  952 
(payment  to  drawer).  See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.} 
§§  l',2.  150;  Cent.  Dig.  §?   ',10-',13.  -'/J^-.'/S.'/i/.. 


150  PAYMENT  OP   CHECKS  (Ch.  4 

be  settled  once  and  for  all.=°  In  one  case  the  mistake  was  dis- 
covered while  the  holder  of  the  check  was  still  at  the  bank 
counter;  but  it  was  held  that,  the  property  having  passed,  the 
money  belonged  irrevocably  to  the  payee.^^  In  Massachu- 
setts, however,  if  the  bank  has  paid  in  the  mistaken  belief  that 
the  funds  of  the  drawer  are 'sufficient,  upon  discovering  its 
mistake  the  bank  may  recover  back  the  money,  unless  the  per- 
son receiving  payment  has  changed  his  position  before  re- 
ceiving notice  of  the  mistake;  =^«  and  in  New  York  the  rule 
appears  to  be  the  same.-" 

JVhen  Bank  Protected  in  Paying 

The  duty  of  a  bank  to  honor  the  drawer's  check  arises  from 
the  fact  that  he  is  a  depositor,  that  is,  a  creditor  of  the 
bank,  and  that  he  has  a  right  to  have  the  bank  pay  its  indebt- 
edness to  him  as  he  may  direct.  If  he  has  made  the  deposit, 
and  it  stands  in  his  name,  he  alone  has  the  right  to  direct  pay- 

2  6  Spokane  &  Eastern  Trust  Co.  v.  Huff  (Wash.)  115  Pac.  80,  33  L. 
R.  A.  (N.  S.)  1023 ;  post,  p.  1G5. 

It  has  also  been  explained  on  the  doctrine  of  Price  v.  Neal  (post, 
p.  162).  See  4  Harv.  Law  Rev.  297,  305.  But  here  the  equities  can 
hardly  be  called  equal,  since  upon  payment  being  refused  the  holder 
still  has  recourse  against  the  drawer.  Sed  25  Harv.  Law  Rev.  185. 
See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  U2,  150;  Cent. 

Dig.  §§  m-m,  i,55--mv2. 

27  Chambers  v.  Miller,  13  C.  B.  N.  S.  125.  See  ''Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)   §§  1J,2,  150;  Cent.  Dig.  §§  410-413,  455- 

mv2. 

28  Merchants'  Nat.  Bank  v.  National  Eagle  Bank,  101  Mass.  281, 
100  Am.  Dec.  120;  Merchants'  Nat.  Bank  v.  National  Bank,  139 
Mass.  513,  2  N.  E.  89.  Cf.  Boylston  Nat.  Bank  v.  Richardson,  101 
Mass.  287;  post,  p.  181.  See  "Banks  and  Banking,"  Dec.  Dig.  [Key 
No.)  §  1J,2;  Cent.  Dig.  §§  410-413. 

2i*  National  Park  Bank  of  New  York  v.  Steele  &  Johnson  Mfg.  Co., 
58  Hun,  81,  11  N.  Y.  Supp.  538 ;  Citizens'  Central  Nat.  Bank  v.  New 
Amsterdam  Nat.  Bank,  128  App.  Div.  554,  112  N.  Y.  Supp.  973.  See, 
also.  Irving  Bank  v.  Wetherald,  36  N.  Y.  335.  But  see  Oddie  v.  Na- 
tional City  Bank  of  New  York,  45  N.  Y.  735,  6  Am.  Rep.  160 ;  post, 
p.  ISl.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  142;  Cent. 
Din.  ?S  .',10- ',1.1. 


§§  41-42)  RIGHTS    OF    BANK    UrOX    PAYMENT  151 

ment  of  it.  The  bank  is  conscciucnlly  protected  if  it  pays  in 
accordance  with  his  order.  It  need  not  inquire  into  the  equi- 
table ownership  of  the  deposit,  and  may  safely  «k«Mime  that 
he  has  a  right  to  dispose  of  it,  unless  it  has  received)  notice  of  -^ 
an  adverse  claim. ^*'  Nor  is  a  bank  under  a  duty  to  supervise 
and  safeguard  a  trust  account,  or  to  look  after  the  appropri- 
ation of  the  funds  when  withdrawn,  in  the  absence  of  circum- 
stances putting  it  upon  inquiry.^^ 

Again,  a  bank  is  protected  in  paying  a  check  although  the 
drawer  may  have  a  personal  defense,  such  as  fraud,  duress, 
or  illegality  of  consideration,  which  he  could  assert  as  'against 
the  holder,  at  least  if  the  bank  pays  without  notice  that  such 
defenses  exists. ^^ 

Tiuie  of  Payment 

As  has  been  stated,  presentment  to  the  bank  for  payment  is 
sufficient  to  charge  the  drawer  of  a  check,  unless  he  is  preju- 
diced by  the  delay,  if  made  at  any  time  within  the  period  of 
the  statute  of  limitations;^^    and  within  this  time  the  bank 


30  Nehawka  Bank  v.  Ingersoll,  2  Neb.  (Unof.)  G17,  89  N.  W.  618 ; 
CaiT  V.  Fidelity  Bank,  126  N.  C.  186,  35  S.  E.  246 ;  ante,  p.  43.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  39S- 
405. 

31  Lowndes  v.  City  Nat.  Bank  of  South  Norwalk,  82  Conn.  8,  72 
Atl.  150,  22  L.  R.  A.  (N.  S.)  408;  City  of  Newburyport  v.  Spear,  204 
Mass,  l-rn,  90  N.  E.  522,  134  Am.  tot.  Rep.  652;  ante,  p.  45.  /See 
"Bunks  and  BanJcing,"  Deo.  Dig.  (Keg  No.)  §  13S;  Cent.  Dig.  §§  398- 
405. 

3  2  Snyder  v.  Corn  Exch.  Nat.  Bank,  221  Pa.  599,  70  Atl.  876,  128 
Am.  St.  Rep.  780  (gaming. consideration) ;  Southern  Hardware  &  Sup- 
ply Co.  V.  Lester,  166  Ala.  86,  52  South.  328  (duress).  In  McCord  v. 
California  Nat:  Bank  of  San  Diego,  96  Cal,  197,  31  Pac.  51,  it  was 
held  that  although  the  bank  cashed  a  check,  Ivnowing  that  it  was 
given  in  payment  of  a  bet  made  in  violation  of  law,  the  drawer  could 
not  recover  from  the  bank.  Cf.  Drinkall  v.  Movius  State  Bank, 
11  N.  D.  10,  88  N.  W.  724,  57  L.  R.  A.  341,  95  Am.  St.  Rep.  693.  See 
"Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  S98-- 
405. 

3  3  Ante,  p.  118. 


152 


PAYMENT  OF   CHECKS  (Ch.  4 


may  safely  pay  a  check,  at  least  if  it  does  not  turn  out  to  be 
subject  to  defenses  as  between  the  holder  and  the  drawer.  It 
is  said,  however,  that  the  age  of  a  check  is  a  cause  of  suspi- 
cion, and  that  it  is  the  right  and  even  the  duty  of  a  bank  to 
make  incjuiry  before  paying  a  stale  check.  Refusal  to  pay  a 
stale  check  until  the  bank  shall  have  had  a  reasonable  time  to 
make  inquiry  of  the  drawer  would  probably  not  be  deemed  a 
dishonor  of  the  check  in  an  action  by  the  holder  against  the 
drawer,^*  or  in  an  action  by  the  drawer  against  the  bank. 
And  if  the  bank  pays  the  check  without  inquiry,  when  inquiry 
would  have  led  to  the  discovery  of  the  fact  that  it  ought  not 
to  have  been  paid,  it  is  said  that  the  bank  must  bear  the  loss,=*^ 
although  there  is  little  authority  upon  the  point.  It  would 
seem  that  within  this  rule,  as  in  cases  between  transferror  and 
transferee,^''  a  check  will  not  be  deemed  stale  if  it  has  been 
outstanding  for  only  a  few  days.^^ 

Revocation  of  Order — Countermand  of  Payment 

Since  a  check  confers  upon  the  payee  or  holder  no  right  to 
drawer's  deposit,  the  drawer  has  the  right  at  any  time  before 
payment  to  countermand  his  order,  or  to  stop  payment  of  the 
check,  by  notice  communicated  to  the  bank.^^  The  notice  may 
be  in  writing  or  oral.^''  Such  notice  determines  the  right  of 
the  bank  to  pay  the  check,  so  that  if  it  disregards  the  notice 
the  payment  is  its  own  loss.^"     In  states  where  it  has  been 

3  4  See  2  Ames,  Cas.  Bills  &  Notes,  p.  724,  note  1. 

3  5  Morse,  Banks  &  B.  (4th  Ed.)  §  44.3. 

3  0  Ante,  p.  126. 

37  A  check  drawn  on  Christmas  Eve  did  not  become  stale  in  six 
daj's.  Merchants'  &  Planters'  Nat.  Bank  6f  Union  v.  Clifton  Mfg. 
Co..  56  S.  C.  320,  33  S.  E.  750.  See  Lancaster  Bank  v.  Woodward.  18 
Pa,  357,  57  Am.  Dec.  618.  See  "Bunks  and  Banking,"  Dec.  DUj.  {Key 
No.)  §  138;  Cent.  Dig.  §§  398-^05. 

3  8  Ante,  p.  127. 

39  People's  Savings  Bank  &  Trust  Co.  v,  Lacey,  146  Ala.  688,  40 
South.  340.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  IS'o.)  §  13D; 
Cent.  Dig.  §|  J,0G-J,09. 

40  People's  Savings  Bank  &  Trust  Co.  v.  Lacey,  146  Ala,  688,  40 


§§  41-42)  RIGHTS    OF    BANK    UPON    PAYMENT  153 

held  that  a  check  operates  as  an  assignment  to  the  holder  of 
the  deposit  pro  tanto,"*^  it  has  been  held,  also,  that  the  drawer 
could  not  defeat  the  holder's  right  by  stopping  pay4««nt  of  the 
check,;  *^  but  wherever  the  Negotiable  Instruments  Law  has 
been  enacted  the  right  of  the  drawer  to  stop  payment  is  now 
absolute.*^  If,  however,  the  check  has  been  certified,  thereby 
substituting  the  obligation  of  the  bank,  the  drawer  can  no 
longer  stop  payment.**  For  the  same  reason,  in  the  case  of  a 
cashier's  check,  which  being  drawn  by  the  bank  upon  itself, 
is  in  legal  effect  a  promissory  note,  the  right  to  stop  payment 
does  not  apply.*  ^ 

Death  of  Drazver 

It  it  commonly  said  that  the  authority  of  a  bank  to  pay  a 
check  is  determined  by  the  death  of  the  drawer,  although 
there  is  little  direct  authority.***     At  the  same  time  it  is  gener- 

South.  346 ;  Albers  v.  Commercial  Bank,  85  Mo.  173,  55  Am.  Rep.  355 ; 
Schneider  v.  Irving  Bank,  30  How.  Prac.  (N.  Y.)  190 ;  Id.,  1  Daly  (N. 
Y.)  500;  Elder  v.  Franklin  Nat.  Bank,  25  Misc.  Rep.  716,  55  N.  Y. 
Supp.  .576.  See  "Banks  and'  Banking,"  Dec.  Dig.  (Key  No.)  §  139; 
Cent.  Dig.  §§  J,06-.',09. 

41  Ante,  p.  129. 

4  2  First  Nat.  Bank  of  Du  Quoin  v.  Keith,  183  111.  475,  56  N.  E. 
179 ;  Loan  &  Savings  Bank  v.  Farmers'  &  Merchants'  Bank,  74  S. 
C.  210,  54  S.  E.  364,  114  Am.  St.  Rep.  991.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  139;  Cent.  Dig.  §§  406-^09. 

43  Ante,  p.  130;  Tease  &  Dwyer  Co.  v.  State  Nat.  Bank,  114  Tenn. 
693,  88  S.  W.  172.  See,  also,  Unaka  Nat.  Bank  v.  Butler,  113  Tenn. 
574,  83  S.  W.  655.  Cf.  Raesser  v.  National  Exch.  Bank,  112  Wis. 
591,  88  N.  W.  618,  56  L.  R.  A.  174,  88  Am.  St.  Rep.  979.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  139;  Cent.  Dig.  §§  Ji06-Ji09. 

4  4  Ante,  p.  132. 

4  5Driukall  v.  Movius  State  Bank,  11  N.  D.  10,  88  N.  W,  724,  57 
L.  R.  A.  341,  95  Am.  St.  Rep.  693.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  139;  Cent.  Dig.  §§  Jf06--'t09. 

4  0  See  National  Commercial  Bank  v.  Miller,  77  Ala.  168,  54  Am. 
Rep.  50;  Second  Nat.  Bank  of  Detroit  v.  Williams,  13  Mich.  282; 
Brennan  v.  Mercliants'  &  INIanufacturers'  Nat.  Bank,  62  Mich.  343,  23 
N.  W.  881 ;  Drum  v.  Benton,  13  App.  D.  C.  245. 

The  English  Bills  of  Exchange  Act,  §  75.  provides:     "The  duty  and 


;154  PAYME>fT   OF   CHECKS  (Ch.  4 

ally  assumed  that  if  the  bank  pays  without  knowledge  of  the 
death  the  payment  is  good,  and  the  bank  is  not  liable  to  the 
drawer's  estate."^  Thtf  cases  in  which  it  has  been  declared 
that  payment  with  knowledge  is  unauthorized  have  generally 
been  cases  of  gift,  in  which  other  considerations  were  in- 
volved,** and  the  question  does  not  appear  to  have  been  ac- 
tually decided  in  any  case  where  the  check  was  given  for 
value.* ^  On  principle,  there  appears  to  be  no  reason  why  the 
order  contained  in  a  check  should  be  revoked  by  mere  knowl- 
edge of  the  drawer's  death,"**  although  the  personal  repre- 
sentatives of  the  drawer  would,  of  course,  have  the  right  to 

authority  of  a  banker  to  pay  a  checque  drawn  on  him  by  his  custom- 
er are  determined  by:  (1)  Countermand  of  payment;  (2)  notice  of 
the  customer's  death."     See  In  re  Beaumont,  [1902]  1  Ch.  889. 

It  is  said  that  the  Negotiable  Instruments  Law  in  its  original 
draft  contained  the  following:  "The  death  of  the  drawer  does  not 
operate  as  a  revocation  of  the  authority  of  the  bank  to  pay  a  check 
if  the  check  is  presented  for  payment  within  ten  days  from  the  date 
thereof"— but  that  this  was  struck  out  from  the  final  draft.  The  pro- 
posed provision  was  taken  from  Pub.  St.  Supp.  Mass.  ISSS,  p.  301,  c. 
210.  See  Huffcut,  Neg.  Inst.  80.  See  "Banks  and  Banking"  Dec. 
Dig.  {Key  No.)  §  139;  Cent.  Dig.  §  408. 

4  7  See  Tate  v.  Hilbert,  2  Ves.  Jr.  Ill;  Brennan  v.  Merchants'  & 
Manufacturers'  Nat.  Bank,  62  Mich.  343,  28  N.  W.  881.  See  "Banks 
and  Banking;'  Dec.  Dig.  {Key  No.)  §  139;  Cent.  Dig.  §  4O8. 

48  See  Tate  v.  Hilbert,  2  Ves.  Jr.  117;  Hewitt  v.  Kaye,  L.  R.  6  Eq. 
198;  Fordred  v.  Seamen's  Savings  Bank,  10  Abb.  Prac.  (N.  S.  N.  Y.) 
425.  But  see,  Phinney  v.  State  ex  rel.  Stratton,  36  Wash.  236,  78 
Pac.  927,  68  L.  R.  A.  119. 

Where  a  cheek  was  drawn  and  delivered  as  a  gift,  with  a  request 
not  to  present  it  till  after  the  donor's  death,  the  death  revoked  the 
gift,  and  the  bank  paying  with  notice  of  the  death  was  liable  to  the 
drawer's  estate.  Pullen  v.  Placer  County  Bank,  138  Cal.  169,  71 
Pac.  83,  94  Am.  St.  Rep.  19.  See  "Banks  and  Banking,"  Dec.  Dig. 
tKey  No.)  §  139;  Cent.  Dig.  §  },0S. 

4  0  See  Weiand's  Adm'r  v.  State  Nat.  Bank  of  Maysville,  112  Ky. 
:j10.  ijTy  S.  W.  617,  66  S.  W.  26,  56  L.  R.  A.  178.  -See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  139;  Cent.  Dig.  §§  406-^09. 

■'•o  See,  Morse,  Banks  &  B.  (4th  Ed.)  §  400 ;  Daniel,  Neg.  Inst.  § 
ICIfih.   To  the  contrai-y,   17   Harv.   Law   Rev.    104,    "Death   of  the 


§§  41-42)  RIGHTS    OF   BANK    UPON    PAYMENT  155 

Stop  payment  by  notice. ^^  In  the  case  of  a  bill  of  exchange, 
the  rule  appears  to  be  that  the  order  to  accept  is  not  revoked 
by  the  drawer's  death. °-  In  jurisdictions  where -^^-check  op- 
erates as  an  assignment,  it  seems  that  the  death  of  the  drawer  -• 
would  not  work  a  revocation;  ^^  but  a  decision  based  on  the 
assignment  theory  would  not  be  any  authority  in  other  juris- 
dictions.^* 

Whatever  may  be  the  duty  and  authority  of  the  bank,  the 
holder  has,  of  course,  a  right  to  recover  against  the  drawer's 
estate. 

Insanity  of  Drawer 

It  seems  that  an  adjudication  of  the  drawer  as  insane  will 
revoke  the  authority  of  the  bank  to  pay  a  check.^^  But  other- 
wise, where  a  deposit  is  made  when  the  depositor  is  sane,  the 
bank  may  pay  the  check  at  any  time,  in  the  absence  of  knowl- 
edge of  his  incapacity  at  the  time  of  payment.^^ 

Signature  of  Check 

In  order  to  authorize  a  bank  to  apply  the  funds  of  a  deposi- 
tor to  the  payment  of  a  check,  the  check  must,  of  course,  be 


Drawer  of  a  Check,"  by  John  Maxey  Zane.  See  "Banks  and  Bank- 
iiiff,"  Dec.  Dig.  (Key  No.)  §  139;  Cent.  Dig.  §§  J,06-400. 

51  Weiand's  Adm'r  v.  State  Nat.  Bank  of  Maysville,  112  Ky.  310, 
65  S.  W.  617,  66  S.  W.  26,  56  L.  R.  A.  178.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  139;  Cent.  Dig.  §§  406-J,09. 

5  2  See  Billings  v.  Devaux,  3  Man.  &  Gr.  565;  Cutts  v.  Perkins,  12 
Mass.  206;  14  Harv.  Law  Rev.  ,588.  Cf.  Negotiable  Instruments  Law, 
§  185.  see  ''Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  139;  Gent. 
Dig.  §§  >,06-.m. 

5  3  See  Lewis  v.  International  Bank,  13  Mo.  App.  202  (the  assign': 
ment  theory  no  longer  prevails  in  Missouri) ;  Wasgatt  v.  First  Nat. 
Bank  (Minn.)  134  N.  W.  224.  See  "Banks  and  Banking,"-  Dec.  Dig. 
{Key  No.)  §  139;    Cent.  Dig.  §§  .i06~.',09. 

54  Ante,  p.  127. 

5  5  American  Trust  &  Banking  Co.  v.  Boone,  102  Ga.  202,  29  S.  E. 
182,  40  L.  R.  A.  250,.  66  Am.  St.  Rep.  167.  Sec  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  139;   Cent.  Dig.  §§  J,0G-.',09. 

5  6  Reed  V.  Mattapan  Deposit  &  Trust  Co.,  198  Mass.  306,  84  X.  E." 


156  PAYMENT  OF   CHECKS  '  (Ch.  4 

the  check  of  the  depositor."  If  a  check  be  drawn  in  the  name 
of  a  depositor,  but  his  signature  was  forged,^«  or  if  his  signa- 
ture purports  to  be  made  by  an  agent,  but  the  signature  was 
unauthorized,^®  the  rights  of  the  drawer  are  unaffected  by 
the  payment. 

If  an  account  stands  in  the  name  of  joint  depositors,  the 
bank  must  require  the  signatures  of  all ;  «**  but  if  the  account 
stands  in  the  name  of  a  partnership,  the  firm  signature  made 
by  one  partner  is  sufficient."^  If  an  account  is  in  the  name 
of  a  corporation,  the  signature  must  be  made  by  an  officer 
who  is  authorized  to  sign."^  j^  jg  customary  for  banks  to  re- 
quire a  depositor  to  lile  his  signature,  or  the  signature  of 
such  other  persons  as  are  authorized  to  sign,  and  in  such  case, 


469.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  A"o.)  §§  138,  139; 
Cent.  Dig.  §§  398-^09. 

sT.Fricano  v.  Columbia  Nat.  Bank,  118  App.  Div.  567,  103  N.  Y. 
Supp.  189. 

A  hank  which  pays  as  garnishee  under  execution  against  a  judg- 
ment debtor  other  than  its  depositor,  though  bearing  the  same  name, 
is  liable  to  the  depositor.  O'Neil  v.  New  England  Trust  Co.,  28  R.  I. 
311,  67  Atl.  63,  11  L.  R.  A.  (N.  S.)  248,  125  Am.  St.  Rep.  740.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  138;  Cent.  Dig.  §§  398- 

405- 

68  Post,  p.  160.  59  Post,  p.  160. 

A  deposit  may  be  made  under  such  circumstances  that  the  de- 
positor is  estopped  from  denying  the  authority  of  another  to  sign 
checks  in  the  depositor's  name.  Tobias  v.  Morris,  126  Ala.  535,  28 
South.  517.  See  "Banks  and  Bunking,"  Dec.  Dig.  (Key  No.)  §  138; 
Cent.  Dig.  §§  398-J,0.5. 

60  Columbia  Finance  &  Trust  Co.  v.  First  Nat.  Bank,  116  Ky.  364, 
76  S.  W.  156;  Nieman  v.  Beacon  Trust  Co.,  170  Mass.  452,  49  N.  E. 
748,  64  Am.  St.  Itep.  315.  See  "Banks  and  Bunking,"  Dec.  Dig.  {Key 
No.)  §  1.38;  Cent.  Dig.  §§  398-J,05. 

61  Carr  v.  Fidelity  Bank,  126  N.  C.  186,  35  S.  E.  246.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  39S-Jf05. 

6  2  First  Nat.  Bank  of  Allegheny  v.  Joseph  Fleming  &  Son  Co., 
226  I'a.  416,  75  Atl.  718. 

Where  there  are  no  circumstances  to  excite  suspicion,  the  bank 
is  not  responsible  if  the  money  is  misappropriated.    Hatch  v.  Johnson 


§§   41-42)  RIGHTS    OF   BANK    UPON    TAYMENT  157 

where  the  signature  is  actually  by  a  person  so  authorized,  the 
bank  will  be  protected. '••'  On  the  other  hand,  if  a  depositor 
instructs  the  bank  to  pay  no  checks  not  signed  or  coiiutersigned 
by  designated  persons,  and  the  bank  disregards  the  instruc- 
tion, the  burden  is  upon  the  bank  to  show  that  the  depositor 
actually  received  the  benefit  of  the  payment."* 

Conformity  to  Order 

In  order  to  give  the  bank  the  right  to  charge  a  payment  to 
the  depositor's  account,  the  payment  must  be  made  in  con- 
formity with  the  order  contained  in  the  check.®  ^ 

The  bank  must  at  its  peril  ascertain  that  the  person  pre- 
senting the  check  is  a  person  authorized  thereby  to  receive 
payment.     If  the  check  is  payable  to  order,  payment  must  be 


Loan  &  Trust  Co.  (C.  C.)  79  Fed.  828.     See  "Banks  and  Banking," 
Dec.  Dig.  {Key  A'o.)  §  138;  Cent.  Dig.  §§  898-^05. 

6  3  Shoe  Lasting  Mach.  Co.  of  New  York  v.  Western  Nat.  Bank, 
70  App.  Div.  588,  75  N.  Y.  Supp.  627.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  138;  Cent.  Dig.  §§  398-405. 

64  Ellis  V.  Western  Nat.  Bank,  136  Ky.  310,  124  S.  W.  334 ;  Glad- 
stone Exch.  Bank  v.  Keating,  94  Mich.  429,  53  N.  W.  1110;  Shoe 
Lasting  Machine  Co.  of  New  York  v.  Western  Nat.  Bank,  70  App. 
Div.  588.  75  N.  Y.  Supp.  627. 

Where  the  deposit  was  by  a  receiver  of  a  corix) ration  appointed  by 
an  order  of  court  which  provided  that  the  funds  should  be  paid  out 
only  on  checks  countersigned  by  the  judge,  of  which  the  bank  had 
knowledge,  the  bank  was  liable  to  creditors  of  the  corporation  for 
funds  paid  out  on  checks  not  countersigned.  American  Nat.  Bank 
of  Macon  v.  Fidelity  &  Deposit  Co.,  129  Ga.  126,  58  S.  E.  867. 

Where  the  depositor  was  a  city,  a  city  ordinance  was  not  notice. 
City  of  Newburyport  v.  Spear,  204  Mass.  146,  90  N.  E.  522,  134  Am. 
St.  Rep.  652.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  138; 
Cent.  Dig.  §§  398-J,05.  ,    ^ 

6  5  National  Dredging  Co.  v.  President,  etc.,  of  Farmers"  Bank,  6 
Pennewill  (Del.)  580,  69  Atl.  607,  16  L.  R.  A.  (N.  S.)  593,  130  Am.  St. 
Rep.  158;  Jordon  Marsh  Co.  v.  National  Shawmut  Bank,  201  Mass. 
397,  87  N.  E.  740,  22  L.  R.  A.  (N.  S.)  250.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  398-Jf05. 


158  PAYMENT  OF   CHECKS  (Ch.  4 

to  the  payee,^^  or  one  claiming  under  a  genuine  indorsement.*^ 
If  the  check  is  payable  to  bearer,  the  bank  may  pay  it  to  any 
person  who  presents  it,"'  unless  there  are  circumstances  to  put 
it  on  inquiry  as  to  his  ownership  of  the  check  or  as  to  defects  in 
his  title. •'°  The  Negotiable  Instruments  Law  provides  that 
an  instrument  is  payable  to  bearer  "when  it  is  payable  to  the 
order  of  a  fictitious  or  nonexisting  person,  and  such  fact  was 
known  to  the  person  making  it  so  payable."  "^^ 

The  bank  must  observe  the  order  in  respect  to  the  time  of 
payment.''^  If  the  check  be  postdated,  payment  before  the 
date  is  unauthorized.^^ 

66  Murphy  v.  Metropolitan  Nat.  Bank,  191  Mass.  159,  77  N.  E.  693, 
114  Am.  St.  Rep.  595;  Lonier  v.  State  Savings  Bank,  149  Mich.  483, 
112  X.  W.  1119. 

The  fact  that  the  payee  is  dead  when  the  check  is  drawn  does  not 
entitle  the  bank  to  pay  to  any  other  than  his  personal  representative. 
Murphy  v.  Metropolitan  Nat.  Bank,  supra.  'See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  So.)  §§  138,  1J,0 ;  Cent.  Dig.  §§  398-Ji05. 

67  Western  Union  Tel.  Co.  v.  Bi-Metallic  Bank,  17  Colo.  App.  229, 
68  Pac.  115 ;  Jordan  Marsh  Co.  v.  National  Shawmut  Bank.  201  Mass. 
397,  87  N.  E.  740,  22  L.  R.  A.  (N.  S.)  250 ;  United  Security  Life  Insur- 
ance &  Trust  Co.  of  Pennsylvania  v.  Central  Nat.  Bank,  185  Pa.  586, 
40  Atl.  97;  post,  p.  171.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
A'o.)  §  138;  Cent.  Dig.  §§  S98-J,05. 

8  8  Peerrot  v.  Mt.  Morris  Bank,  120  App.  Div.  247,  104  N.  Y.  Supp. 
1045 ;  Farmers'  &  Merchants'  Bank  v.  Bank  of  Rutherford,  115  Tenn. 
64,  88  S.  W.  939,  112  Am.  St.  Rep.  817.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  398-405. 

69  See  Wedge  Mines  Co.  v.  Denver  Nat.  Bank,  19  Colo.  App.  182, 
73  Pac.  873;  Negotiable  Instruments  Law,  §  88.  See  i'Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  138;  Cent.  Dig.  §§  398-405. 

7  0  Negotiable  Instruments  Law,  §  9(3) ;  post,  p.  173. 

71  Ante,  p.  151. 

7  2  Godin  V.  Bank  of  Commonwealth,  6  Duer  (N.  Y.)  76.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  ^58;  Cent.  Dig.  §§  398-Jt06. 


§§  43-45)  FORGED   CHECKS  159 


FORGED  CHECKS 

43.  SIGNATURE  OF  DRAWER  FORGED— Where  the 

drawee  bank  pays  a  check  upon  which  the  signa- 
ture of  the  drawer  was  forged,  the  bank  cannot 
charge  the  payment  to  his  account,  unless  he  by  his 
conduct  has  precluded  himself  from  contesting  the 
right  of  the  bank  to  make  the  payment  or  to  charge 
his  account.  Nor  can  the  bank,  although  it  paid 
the  check  in  ignorance  of  the  forgery,  recover  back 
the  amount  from  the  person  to  whom  it  has  been 
paid,  if  he  was  a  bona  fide  holder  of  the  check,  un- 
less by  bad  faith  or  misconduct  he  contributed  to 
the  success  of  the  fraud  or  to  the  mistake  under 
which  the  payment  was  made. 

44.  ALTERED  CHECK— Where  the  drawee  bank  pays  a 

check  which  was  altered  after  its  issue,  the  bank 
cannot  charge  the  payment  to  the  account  pf  the 
drawer,  unless  by  his  conduct  he  has  precluded 
himself  from  contesting  the  right  of  the  bank  to 
make  the  payment  or  to  charge  his  account.  The 
bank  may  recover  back  the  amount  from  the  per- 
son to  whom  it  was  paid,  although  he  was  a  bona 
fide  holder  of  the  check. 

45.  FORGED  INDORSEMENT— Where  the  drawee  bank 

pays  a  check  to  one  who  is  not  entitled  to  receive 
payment  because  of  a  forged  indorsement,  the  bank 
cannot  charge  the  amount  to  the  account  of  the 
drawer,  unless  by  his  conduct  he  has  precluded 
himself  from  contesting  the  right  of  the  bank  to 
make  payment.  The  bank  may  recover  back  the 
amount  from  the  person  to  whom  the  payment  was 
made. 


1(J0  PAYMENT  OF   CHECKS  (Ch.  4 

Signature  of  Dra-u'er  Forged— Rights  of  Bank  Against 
Drazi'cr 
Inasmuch  as  a  bank  can  be  authorized  to  pay  out  money 
upon  the  account  of  a  depositor  only  upon  his  order,  if  it  pays 
a  check  purporting  to  be  drawn  by  him,  but  on  which  his  sig- 
nature was  forged,  his  rights  against  the  bank  are  not  affected 
by  the  unauthorized  payment.' ^  And  the  result  is  the  same  if 
his  signature  was  written  by  one  who  without  authority  as- 
sumed to  act  as  his  agent.'*  In  either  case  the  bank  cannot 
charge  the  payment  to  the  account  of  the  drawer,  unless  his 
conduct  was  such  as  to  estop  him  from  denying  the  genuine- 
ness of  the  signature,  or  the  authority  of  the  agent,' ^  or  unless 
he  subsequently  ratifies  the  signature,  or  precludes  himself 
from  contesting  the  right  of  the  bank  to  make  the  charge.'*^ 

T3  See  Leather  Mfrs.'  Nat.  Bank  v.  Morgan,  117  U.  S.  9G,  6  Sup. 
Ct.  6.57.  29  L.  Ed.  811 ;  First  Nat.  Bank  of  Birmingham  v.  Allen,  IM 
Ala.  476,  14  South.  335,  27  L.  R.  A.  426,  46  Am.  St.  Rep.  80 ;  Janiu 
V.  London  &  San  Francisco  Bank,  92  Cal.  14,  27  Pac.  1100,  14  L. 
R.  A.  320,  27  Am.  St.  Rep.  82 ;  National  Dredging  Co.  v.  President, 
etc.,  of  Farmers'  Bank,  6  Pennewill  (Del.)  580,  69  Atl.  607,  16  L. 
R.  A.  (N.  S.)  593,  130  Am.  St.  Rep.  1.58;  Hardy  v.  Chesapeake 
Bank,  51  Md.  585,  34  Am.  Rep.  325;  Harter  v.  Mechanics'  Nat. 
Bank,  63  N.  J.  Law,  578,  44  Atl.  715,  76  Am.  St.  Rep.  224;  Mc- 
Xeely  Co.  v.  Bank  of  North  America,  221  Pa.  5SS,  70  Atl.  891,  20  L. 
R.  A.  (N.  S.)  79.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  l/fS;   Cent.  Diff-  §§  m-452. 

7  4  Georgia  Railroad  &  Banking  Co.  v.  Love  &  Good  Will  Soc, 
85  Ga.  293,  11  S.  E.  616.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  U8j   Cent.  Dig.  §§  438-452. 

7  5  Scanlon-Gipson  Lumber  Co.  v.  Germania  Bank,  90  Minn.  478, 
97   N.   W.  380. 

The  mere  possession  by  a  depositor,  without  notice  to  the  bank, 
of  a  rubber  stamp  making  a  fac-simile  of  his  signature,  did  not 
make  him  liable  for  money  paid  out  on  checks  forged  therewith, 
nor  upon  the  particular  facts  was  he  negligent  in  the  care  of  the 
stamp,  so  as  to  make  him  liable.  Robb  v.  Pennsylvania  Co.  for 
Insurance  on  Lives  and  Granting  Annuities,  186  Pa.  456,  40  Atl. 
9<»,  65  Am.  St.  Rep.  868;  Id.  (Pa.)  41  Atl.  49.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  148;    Cent.  Dig.  §§  438-452. 

7  0  PhfiMiix  Nat.  Bank  v.  Taylor,  113  Ky.  61,  67   S.  W.  27;    post, 


§§  43-45)  FOKGED   CHECKS  161 

Same — Rights  of  Bank  Against  Payee 

Where  a  bank  upon  which  a  check  has  been  drawn  pays  it, 
in  ignorance  tliat  the  drawer's  signature  was  forgcrfT'the  bank 
cannot,  as  a  rule,  upon  discovery  of  its  mistake,  recover  back 
the  amount,  if  the  person  to  whom  the  money  was  paid  was 
a  bona  fide  holderJ^  The  rule  does  not  apply,  however,  if 
the  party  receivini^  the  money  has  actually  contributed  by  his 
bad  faith  or  misconduct  to  the  success  of  the  fraud  or  to  the 
mistake  under  which  the  payment  was  made,  as  where,  when 
he  received  payment,  he  knew  the  check  was  forged,  or  knew 
of  circumstances  casting  suspicion  on  its  genuineness  not 
known  to  the  bank  and  which  he  failed  to  communicate  to  it,''* 

p.  161.    See  ''Banks  and  Banking,'"  Dec.  Dig.  {Key  No.)  §  lJf8;   Cent. 
Dig.  §§  438-Ji52. 

7  7  Smith  V.  Mercer,  6  Taunt.  76;  First  Nat.  Bank  of  Marshall- 
town  V.  Marshalltown  State  Bank,  107  Iowa,  327,  77  N.  W.  1045, 
44  L.  R.  A,  131 ;  Neal  v.  Coburn,  92  Me.  139,  42  Atl.  348,  69  Am.  St. 
Rep.  495;  Dedham  Nat.  Bank  v.  Everett  Nat.  Bank,  177  Mass. 
392,  59  N.  E.  62,  83  Am.  St.  Rep.  286 ;  Germania  Bank  of  Minneapolis 
V.  Boutell,  60  Minn.  189,  62  N.  W.  327,  27  L.  R.  A.  635,  51  Am. 
St.  Rep.  519;  National  Bank  of  Rolla  v.  First  Nat.  Bank  of 
Salem,  141  Mo.  App.  719,  125  S.  W.  513;  State  Bank  of  Chicago 
V.  First  Nat.  Bank  of  Omaha,  87  Neb.  351,  127  N.  W.  244,  29  L. 
R.  A.  (N.  S.)  100;  National  Park  Bank  v.  Ninth  Nat.  Bank,  46 
N.  Y.  77 ;  Salt  Springs  Bank  v.  Syracuse  Sav.  Inst.  62  Barb.  (N. 
Y.)  101;  Title  Guarantee  &  Trust  Co.  v.  Haven,  126  App.  Div. 
802,  111  N.  Y.  Supp.  305;  Trust  Co.  of  America  v.  Hamilton  Bank 
of  New  York,  127  App.  Div.  515,  112  N.  Y.  Supp.  84;  Yarborough 
V.  Banking  Loan  &  Trust  Co.,  142  N.  C.  377,  55  S.  E.  296;  First 
Nat.  Bank  of  Belmont  v.  First  Nat.  Bank  of  Barnesville,  58  Ohio 
St.  207,  50  N.  E.  723,  41  L.  R.  A.  584,  65  Am.  St.  Rep.  748;  Bank 
of  St.  Albans  v.  Farmers'  &  Mechanics'  Bank,  10  Vt.  141,  33  Am. 
Dec.  188.  Cf.  Iron  City  Nat.  Bank  v.  Ft.  Pitt  Nat.  Bank,  159  Pa. 
46,  28  Atl.  195,  23  L.  R.  A.  615  (under  Pennsylvania  statute).  Con- 
tra: First  Nat.  Bank  of  Lisbon  v.  Bank  of  Wyndmere,  15  N.  D. 
299,  108  N.  W.  546,  10  L.  R.  A.  (N.  S.)  49,  125  Am.  St.  Rep.  588.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  i//7;   Cent.  Dig.  §§  4^7- 

7  8  See    National  Bank  of  North  America  of  Boston  v.  Bangs,  106 
Mass.  441,  8  Am.  Rep.  349;    First  Nat.  Bank  of  Quiucy  v.  Richer, 
TIFF.BKS.&  B.— 11 


162  PAYMENT   OF   CHECKS  (Ch.  4 

or  where  he  received  the  check  under  circumstances  of  sus- 
picion, without  the  usual  scrutiny  or  other  precautions  against  . 
mistake  or  fraud,  as  by  accepting  the  check  from  a  stranger 
without  inquiry  as  to  his  identity  and  character.''® 

The  rule  that  a  drawee  pays  at  his  peril  a  bill  on  which  the 
drawer's  signature  is  forged  was  established  in  1762  in  Price 
V.  Neal.^°  "It  is  an  action  upon  the  case,"  said  Lord  Mans- 
field, "for  money  had  and  received  to  the  plaintiff's  use.  In 
which  action,  the  plaintiff  cannot  recover  the  money,  unless 
it  be  against  conscience  in  the  defendant  to  retain 'it,  and 
great  liberality  is  always  allowed  in  this  sort  of  action.  But 
it  can  never  be  thought  unconscientious  in  the  defendant  to 
retain  this  money,  when  he  has  once  received  it  upon  a  bill  of 
exchange  indorsed  to  him  for  a  fair  and  valuable  considera- 
tion, which  he  had  bona  fide  paid  without  the  least  privity 
or  suspicion  of  forgery.  *  *  *  j^  ^yas  incumbent  upon 
the  plaintiff  to  be  satisfied  'that  the  bill  drawn  upon  him  was 
in  the  drawer's  hand,'  before  he  accepted  or  paid  it;  but  it 
was  not  incumbent  upon  the  defendant  to  inquire  into  it. 
*  *  *  It  is  a  misfortune  which  has  happened  without  the 
defendant's  fault  or  neglect.  If  there  was  no  neglect  in  the 
plaintiff',  yet  there  is  no  reason  to  throw  off  the  loss  from  one 

71  111.  439,  22  Am.  Rep.  104.  Sec  "Banks  and  Banking,"  Dec.  Dig. 
(Key  A'o.)  §  W;  Cent.  Dig.  §§  4^7-45 J,. 

7  9  Natloual  Bank  of  North  America  of  Boston  v.  Bangs,  106  Mass. 
441,  8  Am.  Rep.  349;  First  Nat.  Bank  of  Danvers  v.  First  Nat. 
Bank  of  Salem,  151  Mass.  280,  24  N.  E.  44,  21  Am.  St.  Rep.  450 ; 
Ellis  V.  Ohio  Life  Ins.  &  Trust  Co.,  4  Ohio  St.  628,  64  Am.  Dee. 
610;  People's  Bank  v.  Franklin  Bank,  88  Tenn.  299,  12  S.  W.  716, 
6  L.  R.  A.  724,  17  Am.  St.  Rep.  884  (cf.  Farmers'  &  Merchants'  Bank 
V.  Bank  of  Rutherford,  115  Tenn.  64,  88  S.  W.  939,  112  Am.  St. 
Rep.  817) ;  Bouvant  v.  San  Antonio  Nat.  Bank,  63  Tex.  610 ;  Bank  of 
Williamson  v.  McDowell  County  Bank,  66  W.  Va.  545,  66  S.  E. 
761.  See,  also,  Greenwald  v.  Ford,  21  S.  D.  28,  109  N.  W.  516.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  1^7;  Cent.  Dig.  §§ 
W-.',ol 

'>o3  Burr.  1.354.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  J. ',7;   Cent.  Dig.  §§  U7-.'i5.'i. 


5§  43-45)  FORGED  CHECKS  163 

innocent  man  upon  another  innocent  man ;  but,  in  this  case, 
if  there  was  any  fault  or  negligence  in  any  one,  it  was  in  the 
plaintiff,  and  not  in  the  defendant."  -*-« 

The  doctrine  of  Price  v.  Neal  has  been  adversely  criticised - 
by  many  text-writers.  It  is  argued  that  by  indorsing  the  in- 
strument, if  it  be  indorsed,  the  holder  warrants  its  genuine- 
ness, and  that,  even  if  he  does  not  indorse  it,  his  own  asser- 
tion of  ownership  is  a  warranty  of  genuineness.^^  In  reply  to 
this  it  is  to  be  said  that,  although  some  cases  speak  of  a  so- 
called  indorsement  as  imparting  a  warranty,*-  an  indorsement. 
strictly  speaking,  is  an  incident  to  the  negotiation  or  transfer, 
and  not  to  the  payment,  of  a  negotiable  instrument,  and  that 
the  writing  of  his  name  on  the  back  of  a  negotiable  instru- 
ment by  one  presenting  it  for  payment  is  not  an  indorsement, 
but  merely  a  receipt  of  payment  or  voucher.*^  Even  an  in- 
dorsement in  its  proper  sense,  although  it  warrants  the  gen- 
uineness of  the  drawer's  signature  to  holders  in  due  course, 

81  Daniel,  Neg.  Inst.  §  1361. 

8  2  See  People's  Bank  v.  Franklin  Bank,  SS  Teun.  299,  12  S.  W. 
71G,  6  L.  R.  4.  724,  17  Am.  St.  Rep.  884.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  147;    Cent.  Dig.  §§  -m-J,5.',. 

83  Neal  V.  Coburn,  92  Me.  139,  42  Atl.  348,  69  Am.  St.  Rep.  49.5; 
Dedham  Nat.  Bank  v.  Everett  Nat.  Bank,  177  Mass.  392,  59  N. 
E.  62,  83  Am,  St.  Rep.  286 ;  First  Nat.  Bank  of  Minneapolis  v.  City 
National  Bank,  182  Mass.  ISO,  65  N.  E.  24,  94  Am.  St.  Rep.  637. 
See,  also,  Keene  v.  Beard,  8  C.  B.  N.  S.  372,  per  Byles,  B. ;  Osboni 
V.  Gheen,  5  Mackey  (D.  C.)  189.  An  indorsement  "for  collection" 
does  not  warrant  the  drawer's  signature.  Northwestern  Nat.  Bank 
of  Chicago  v.  Bank  of  Commerce  of  Kansas  City,  107  Mo.  402,  17 
S.  W.  982,  15  L.  R.  A.  102;  First  Nat.  Bank  of  Belmont  v.  First 
Nat.  Bank  of  Barnesville,  58  Ohio  St.  207,  50  N.  E.  723,  41  L.  R. 
A.  584,  05  Am.  St.  Rep.  748.  Where  a  check  is  paid  through  the 
clearing  house  with  an  indorsement  of  the  bank  presenting  it,  "In- 
dorsements guaranteed,"  this  is  a  guaranty  of  the  genuineness  of 
the  whole  instrument,  including  indorsements,  except  the  signature 
of  the  drawer.  New  York  Produce  Exchange  Bank  v.  Twelfth  Ward 
Bank  of  City  of  New  York,  135  App.  Div.  52,  119  N.  Y.  Supp.  988. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  1^7;    Cent.  Dig. 

§§  w-m. 


1C4  PAYMENT   OF   CHECKS  (Cll.  4 

does  not  warrant  its  genuineness  to  the  drawee."*  Still  less 
is  a  warranty  to  be  implied  where  an  instrument  is  presented 
without  indorsement.  A  warranty  of  genuineness  is  implied, 
indeed,  upon  the  transfer  of  a  bill  or  a  note  transferable  by 
delivery  even  without  indorsement;^^  but  the  law  attaches 
no  such  warranty  to  mere  presentment,  for  to  imply  from  pre- 
sentment an  assertion  of  the  genuineness  of  the  drawer's  sig- 
nature would  be  unnatural  and  illogical,  in  view  of  the  rela- 
tion of  the  parties,  inasmuch  as  the  holder  has  not,  while  the 
drawer  has,  means  of  knowing  whether  the  signature  is  genu- 
ine.*® Against  the  doctrine  of  Price  v.  Neal  it  is  urged,  also, 
with  greater  force,  that  ordinarily  money  paid  under  a  mis- 
take of  fact  may  be  recovered  back,  however  negligent  the 
party  making  the  payment  may  have  been  in  making  the  mis- 
take, unless  the  payment  has  caused  such  a  change  in  the 
position  of  the  other  that  it  would  be  unjust  to  require  him 
to  refund.®^ 

Although  these  criticisms  have  not  been  without  influence 
upon  some  of  the  decisions,**  the  doctrine  of  Price  v.  Neal  is 

8  4  Germania  Bank  of  Minneapolis  v.  Boutell,  60  Minn.  189,  62 
N.  W.  327,  27  L.  R.  A.  635,  51  Am.  St.  Rep.  519;  Farmers'  &  Mer- 
chants' Bank  v.  Bank  of  Rutherford,  115  Tenn.  64,  88  S.  W.  939, 
112  Am.  St.  Rep.  817.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  U8;  Cent.  Dig.  §§  43S-J,52;  "Bills  and  Notes,"  Dec.  Dig. 
(Key  No.)  §  296;    Cent.  Dig.  §§  667-679. 

**5  Negotiable  Instruments  Law,  §  65. 

86  See  Bernheimer  v.  Marshall,  2  ]Minn.  78  (Gil.  61),  72  Am.  Dec. 
89;  4  Harv.  Law  Rev.  301,  302.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  l-'iS;    Cent.  Dig.  §§  J,3S-Jf52. 

8  7  See  Morse,  Banks  &  B.  (4th  Ed.)  §  462  et  seq. 

8  8  See  First  Nat.  Bank  of  Lisbon  v.  Bank  of  Wyndmere,  15  N.  D. 
299,  108  N.  W.  546,  10  L.  R.  A.  (N.  S.)  49,  125  Am.  St.  Rep.  588; 
First  Nat.  Bank  of  Crawfordsville  v.  First  Nat.  Bank  of  Lafayette, 
4  Ind.  App.  355,  30  N.  E.  808,  51  Am.  St.  Rep.  221 ;  American  Ex- 
press Co.  V.  State  Nat.  Bank,  27  Okl.  824,  113  Pac.  711,  33  L.  R. 
A.  (N.  S.)  188;  Canadian  Bank  of  Commerce  v.  Bmgham,  30  Wash. 
484,  71  Bac.  43,  60  L.  R.  A.  955;  Id.,  46  Wash.  657,  91  Pac.  185. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)   §  US;    Cent.  Dig. 

§§  m-m. 


§§  43-45)  FOHGED    CHECK3  165 

firmly  established  in  England  and  America.  It  is  said  to  have 
been  enacted  by  the  codes  of  the  principal  countries  of  Con- 
tinental Europe.^"  It  has  sometimes  been  explaifiecl  as  based 
on  public  policy  or  convenience,  which  requires  that,  as  be- 
tween the  drawee  and  holders  in  good  faith,  the  drawee  bank 
should  be  deemed  the  place  of  final  settlement,  where  all  prior 
mistakes  and  forgeries  should  be  corrected  once  and  for  all/'"' 
The  best  explanation  of  the  doctrine,  perhaps,  is  that  it  rests 
upon  "that  far-reaching  principle  of  natural  justice,  that  as 
between  two  persons  having  equal  equities,  one  of  whom  must 
sufifer,  the  legal  title  shall  prevail.  The  holder  of  the  bill  of 
exchange  paid  away  his  money  when  he  bought  it ;  the  drawee 
parted  with  his  money  when  he  took  up  the  bill.  Each  paid  in 
the  belief  that  the  bill  was  genuine.  In  point  of  natural  jus- 
tice they  are  equally  meritorious.  But  the  holder  has  the  legal 
title  to  the  money.  A  court  of  equity  (and  the  action  of  as- 
sumpsit for  money  had  or  received  is,  in  substance,  a  bill  of 
equity)  cannot  properly  interfere  to  compel  the  holder  to  sur- 
render his  legal  advantage."  ''^ 


89  4  Harv.  Law  Rev.  297;    17  Harv.  Law  Rev.  583. 

9  0  Germania  Bank  of  Minneapolis  v.  Boutell,  60  Minn.  189,  193, 
62  N.  W.  327,  27  L.  R.  A.  635,  51  Am.  St.  Rep.  519,  per  Mitchell,  J. 

"Probably  the  rule  was  adopted  from  an  impression  of  con- 
venience rather  than  from  any  more  academic  reason."  Dedham 
Nat.  Bank  v.  Everett  Nat.  Bank,  177  Mass.  392,  59  N.  E.  62,  83 
Am.  St.  Rep.  280,  per  Holmes,  C.  J.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)   §  U8;    Cent.  Dig.  §§  ^38-45-). 

91  "The  Doctrine  of  Price  v.  Neal,"  by  the  late  Dean  J.  B.  Ames, 
4  Harv.  Law  Rev.  297,  299.  He  adds:  "Lord  Mansfield  considered,  it 
is  true,  the  question  of  the  drawee's  negligence,  but  it  is  evident 
*  *  *  that  he  based  his  opinion  chiefly  upon  flie  principle  just 
stated."  "The  opposition  of  some  text-writers  to  the  rule  seems 
to  us  to  arise  from  the  fact  that  the  many  courts  seized  hold  of 
one  of  the  lesser  reasons  given  by  Lord  Mansfield,  *  *  *  ^nd 
from  it  worked  out  a  theory  of  estoppel  against  the  drawee  to  dis- 
pute the  signature  of  the  drawer.  Hence  the  failure  of  the  courts 
of  this  country  to  apply  the  principle  of  Price  v.  Neal  to  genuine 
draft    which    has   been   altered    after   the   drawing   and   before  ac- 


IQQ  PAYMENT  OF   CHECKS  (Ch.  4 

The  view  has  been  advanced  by  some  courts,^-  with  good 
reason,  that  the  doctrine  of  Price  v.  Neal  is  now  the  law  in  all 
states  which  have  enacted  the  Negotiable  Instruments  Law, 
by  virtue  of  the  provisions  that  a  check  is  a  bill  of  exchange, 
except  as  therein  otherwise  provided,  that  a  certification  is 
equivalent  to  an  acceptance,  and  that  "the  acceptor  by  accept- 
ing the  instrument  engages  that  he  will  pay  it  according  to  the 
tenor  of  his  acceptance,  and  admits  the  existence  of  the  draw- 
er, the  genuineness  of  his  signature,  and  his  capacity  and  au- 
thority to  draw  the  instrument."  If  a  bank  certifying  a  forged 
check  must  pay  it,  a  fortiori  a  bank  which  has  paid  such  a 
check  without  certification  should  not  recover  the  money  paid 
from  a  bona  fide  holder. 
Altered  Check— Rights  of  Bank  Against  Drazver 

Since  a  bank  is  authorized  to  pay  upon  the  account  of  a  de- 
positor only  in  conformity  with  his  order,  if  a  bank  pays  a 
check  which  was  materially  altered  after  its  issue,  it  cannot, 
at  least  in  the  absence  of  special  circumstances."^  charge  the 
payment  to  the  drawer."*     Such  an  alteration,  indeed,  unless, 

ceptance  or  payment."    17  Harv.  Law  Rev.  583.     See,  also,  4  Harv. 
Law  Rev.  306 ;  post,  p.  167.    Cf.  Keener,  Quasi  Contracts,  155  et  seq. 

3  2  National  Bank  of  Rolla  v.  First  Nat.  Bank  of  Salem,  141  Mo. 
App.  719,  125  S.  W.  513;  National  Bank  of  Commerce  in  St.  Louis 
V.  Mecbanics'  American  Nat.  Bank,  148  Mo.  App.  1,  127  S.  W.  429; 
Title  Guarantee  &  Trust  Co.  v.  Haven,  126  App.  Div.  802,  111  N. 
Y.  Supp.  305.  See  Negotiable  Instruments  Law,  §§  G2,  185,  187- 
189.  See,  also,  14  Harv.  Law  Rev.  242.  See  "Banks  and  Banking,'' 
Dec.  Dig.  {Key  No.)  §  1J,8;    Cent.  Dig.  §§  JtSS-Jfo-i. 

9  3  Post,  p.  169. 

04  Leather  Manufacturers'  Nat.  Bank  v.  Morgan,  117  U.  S.  96, 
6  Sup.  Ct.  657,  29  L.  Ed.  811;  National  Dredging  Co.  v.  President, 
etc.,  of  Farmers'  Bank,  6  Penuewill  (Del.)  580,  69  Atl.  607,  16 
L.  R.  A.  (N.  S.)  593,  130  Am.  St.  Rep.  158;  Chicago  Savings  Bank 
V.  Block,  126  111.  App.  12S;  Critten  v.  Chemical  Nat.  Bank,  171 
N.  Y.  219,  G3  N.  E.  969,  57  L.  R.  A.  529;  National  Bank  of  Vir- 
ginia V.  Nolting,  94  Va.  263,  26  S.  E.  826 ;  Morris  v.  Beaumont  Nat. 
Bank,  37  Tex.  Civ.  App.  97,  83  S.  W.  36. 

Where  plaintiff,  intending  to  be  absent,  drew  a  postdated  check, 


§§  43-45)  FORGED   CHECKS  167 

in  accordance  with  the  rule  formerly  prevailing-  in  America,  it 
was  the  act  of  a  stranger,  nullifies  the  instrument.  Neverthe- 
less there  is  authority  to  the  effect  that,  if  the-  alteration  was 
by  raising  the  amount,  the  bank  may  charge  the  drawer  for" 
the  original  amount. "^  The  Negotiable  Instruments  Law,  fol- 
lowing the  English  rule,  provides  in  effect  that  the  instrument 
is  avoided  by  an  alteration,  even  if  it  be  the  act  of  a  stranger, 
but  also  provides  that  "when  an  instrument  has  been  materi- 
ally altered  and  is  in  the  hands  of  a  holder  in  due  course,  not 
a  party  to  the  alteration,  he  may  enforce  payment  thereof  ac- 
cording to  its  original  tenor."  °^  It  would  seem  that  this  provi- 
sion should  operate  to  the  benefit  of  the  bank,  as  against  the 
drawer,  where  it  has  paid  a,  raised  check  to  a  holder  in  due 
course. 

Same — Rights  of  Bank  Against  Payee 

Where  the  bank  has  paid  such  altered  check,  it  has  been 
uniformly  held  in  the  United  States  that  it  may  recover  the 
amount  from  the  party  to  whom  payment  was  made,  although 
he  was  a  holder  in  good  faith. ^'^     Such  a  case  has  been  distin- 

payable  to  his  clerk,  to  be  used  if  plaintiff  did  not  sooner  return, 
and  the  clerk  altered  the  date  to  an  earlier  date,  cashed  the  check, 
and  absconded,  the  bank  could  not  charge  the  drawer's  account. 
Crawford  v.  West  Side  Bank,  100  N.  Y.  50,  2  N.  E.  881,  53  Am. 
Rep.  152.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  I48; 
Cent.  Dig.  §§  ^38-45.',.   ■ 

95  Hall  V.  Fuller,  5  B.  &  C.  750.  See  "Banks  and  Banking"  Dec. 
Dig.  {Key  No.)  §  US;    Cent.  Dig.  fl  438-452. 

0  6  Section  124;    ante,  p.  136. 

97  Redington  v.  Woods,  45  Cal.  406,  13  Am.  Rep.  190;  Con- 
tinental Nat.  Bank  v.  INIetropolitan  Nat.  Bank,  107  111.  App.  455; 
Parke  v.  Rosei%  67  Ind.  500,  33  Am.  Rep.  102;  Bank  of  Commerce 
V.  Union  B^ink,  3  N.  Y.  236.  See,  also.  National  City  Bank  of 
Brooklyn  v.  Westcott,  118  N.  Y.  468,  23  N.  E.  900,  16  Am.  St. 
Rep.   771. 

Where  a  raised  check  is  deposited  by  the  payee  with  a  bank  for 
collection,  and  is  restrictively  indorsed  by  it,  without  representa- 
tion of  ownership,  and  is  paid  by  the  drawee,  and  the  funds  are 
paid  by  the  collecting  bank  to  payee,  the  collecting  bank  cannot  be 


168  PAYMENT  OF   CHECKS  (Ch.  4 

guished,  not  very  successfully,  from  one  of  payment  of  a  check 
on  which  the  signature  of  the  drawer  was  forged,  on  the 
ground  that  the  drawee  is  supposed  to  know  the  signature  of 
the  drawer,  but  not  the  handwriting  in  the  body  of  the  bill. 
and  that  consequently,  no  negligence  being  imputable  to  the 
bank,  provided  the  alteration  is  not  manifest,  the  payee  ought 
not  in  conscience  to  retain  the  money."^  Where  the  alteration 
was  in  the  amount,  it  has  been  held,  upon  equitable  princi- 
ples,, that  the  bank  could  recover  only  the  difference  between 
the  amount  for  which  the  check  w^as  drawn  and  the  amount 
paid."" 

The  holding  that  the  bank  may  recover  back  the  amount 
from  the  person  receiving  payment  has  been  the  same  where 
the  bank  has  paid  a  check  which  it  had  certified,  both  where 
the   alteration   was   before  the  certification, ^°°   and  where  it 


held  liable  by  the  drawee.  Crocker-Woolworth  Nat.  Bank  v.  Nevada 
Bank,  139  Cal.  504,  73  Pac.  450,  63  L.  R.  A.  245,  96  Am.  St.  Rep, 
169.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  I4S;  Cent. 
Dig.  §§  438-452. 

9  8  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230;  ante,  p.  165. 
note  91.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  I48; 
Cent.  Dig.  §§  438-452. 

9  8  Merchants'  Bank  of  New  York  v.  Exchange  Bank  of  New 
Orleans,  16  La.  457;  City  Bank  of  Houston  v.  First  Nat.  Bank  of 
Houston,  45  Tex.  203.  See,  also,  National  Bank  of  Commerce  of 
N^ew  York  v.  National  Mechanics'  Banking  Ass'n  of  New  York,  55 
N.  Y.  211,  14  Am.  Rep.  232. 

Under  Negotiable  Instruments  Law,  §  124,  it  would  seem  that,  if 
the  bank  had  paid  a  raised  check  to  a  holder  who  would  be  in 
a  position  to  enforce  it  against  the  dravs^er  according  to  its  original 
tenor,  the  recovery  of  the  bank  should  be  limited  to  that  amount. 
Ante,  p.  167.  See  Imperial  Bank  v.  Bank  of  Hamilton  [1903]  A. 
C»  49. 

In  order  to  be  a  holder  in  due  course,  the  check  must  be  regular 
on  its  face  (section  52),  and  it  is  not  so  if  the  alteration  is  apparent. 
Elias  V.  Whitney,  50  Misc.  Rep.  320,  98  N.  Y.  Supp.  007.  See  "Banks 
and  Banking,"   Dec.   Dig.   (Key  No.)   §  148;    Cent.  Dig.   §§  438-4-52. 

100  Marine  Nat.  Bank  v.  National  City  Bank,  59  N.  Y.  07,  17 
Am.  Rep.  305;  ante,  p.  167.  Soe  "Banks  and  Banking,"  Dec.  Dig. 
(K'„  Yo.)  §  jr.js;    Cent.  Dig.  §§  438-452. 


§§  43-45)  FORGED   CHECKS  169 

was  made  subsequently,^"^  provided  the  bank,  in  making  the 
payment,  has  not  been  guihy  of  culpable  negligence. ^°^ 

Same — Negligence  Facilitating  Alteration  — *-* 

Where  a  party  to  a  negotiable  instrument,  seeking  to  defend- 
on  the  ground  of  alteration,  has  by  his  negligence  made  the 
alteration  possible — as  where  he  has  carelessly  left  spaces  be- 
fore or  after  the  words  or  figures  expressing  the  amount — 
it  is  held  in  many  jurisdictions  that  he  is  liable  on  the  instru- 
ment as  altered  to  a  bona  fide  purchaser,  upon  the  ground 
that  where  one  of  two  innocent  persons  must  suffer,  if  one  by 
his  want  of  care  has  made  the  loss  possible,  the  loss  must 
fall  upon  him.^°^  In  other  jurisdictions,  the  courts  refuse  to 
apply  this  doctrine  to  the  case  in  question ;  for,  it  is  said,  the 
maker  of  the  instrument  owes  no  duty  to  a  subsequent  holder, 
and  may  rest  on  the  presumption  that  it  will  not  be  criminally 
altered,  and  that  a  purchaser  must  be  considered  as  taking  the 


101  National  Bank  of  Commerce  of  New  York  v.  National  Me- 
chanics' Banking  Ass'n  of  New  York,  55  N.  Y.  211,  14  Am.  Rep. 
232.  See  "Banks  and  Banlcinff,"  Dec.  Dig.  {Key  No.)  §  I48;  Cent. 
Dig.   §§  Jf38-Ji52. 

102  Continental  Nat.  Bank  of  New  York  v.  Tradesmen's  Nat.  Bank, 
36  App.  Div.  112,  55  N.  Y.  Supp.  545. 

AYhere  defendant  bank  certified  a  draft,  and  afterwards  was  noti- 
fied by  the  drawer  that  it  had  been  lost,  and  not  to  pay  it,  and 
subsequently  it  was  altered  as  to  payee  and  amount,  and  plaintiff 
before  purchasing  it  sent  it  to  defendant  to  ascertain  if  the 
cei'tifitation  was  good,  and  defendant's  teller,  without  referring 
to  the  register  of  certified  bills,  stated  that  the  certification  Was 
good,  a  judgment  for  plaintiff,  resting  on  a  finding  of  culpable 
negligence,  was  aflirmed.  Clews  v.  Bank  of  New  York  Nat.  Banking 
Ass'n,  114  N.  Y.  70,  20  N.  E.  852.  See,  also,  same  case,  89  N.  Y. 
418,  42  Am.  Rep.  303;  105  N.  Y.  398,  11  N.  E.  814.  See  "Banks 
and  Banking;'  Dec.  Dig.   {Key ,No)   §  i/,S;    Cent.  Dig.  §§  Jt38-Jt52. 

io3Yocum  V.  Smith,  63  111.  321,  14  Am.  Rep.  120;  Hflckett  v.' 
First  Nat.  Bank,  114  Ky.  193,  70  S.  W.  064;  Isnard  v.  Torres,  10 
La.  Ann.  103;  Capital  Bank  v.  Armstrong,  62  Mo.  59;  Brown  v. 
Reed,  79  Pa.  370,  21  Am.  Rep.  75.  See  "Banks  and  Banking"  Dec: 
Dig.  {Key  No.)  §  I4S;    Cent.  Dig.  §§  J,3S-Jt52. 


170  PAYMENT   OF   CHECKS  (Ch.  4 

instrument  at  his  own  risk.^°*  The  question  whether  the  draw- 
er of  a  check  which  has  been  so  altered  is  liable  thereon  to 
a  bona  fide  holder  will,  of  course,  depend  upon  which  of 
these  two  rules  is  adopted  in  the  particular  jurisdiction. 

A  different  question  is  presented,  however,  as  between  the 
bank  and  a  depositor  who  has  so  carelessly  prepared  a  check 
that  it  can  easily  be  raised  without  suspicion,  when  the  bank 
has  paid  the  altered  check.  It  may  properly  be  said  that  the 
depositor  does  owe  a  duty  to  the  bank,  which  is  bound  at  its 
peril  to  honor  his  checks.  The  leading  case  upon  the  gen- 
eral doctrine  of  negligence  facilitating  alteration  (Young  v. 
Grote),^°^  decided  in  England  in  1827,  was  such  a  case,  and 
it  was  there  held  that  a  banker  was  not  liable  for  a  raised 
check,  where  he  had  been  misled  into  paying  it  by  such  want 
of  caution  on  the  part  of  the  drawer.  The  rule  in  Young  v. 
Grote  appears  to  be  no  longer  the  law  in  England ;  ^"^  but  it 
has  been  followed  recently  in  New  York,  where  a  different 
rule  prevails  as  between  the  maker  of  a  negotiable  instrument 
and  a  bona  fide  purchaser,^"^  upon  the  ground  that  a  deposi- 
tor owes  a  duty  of  care  to  the  bank.^°^    In  jurisdictions  where 

104  Exchange  Nat.  Bank  v.  Bank  of  Little  Rock,  58  Fed.  140,  7 
C.  C.  A.  Ill,  22  L.  R.  A.  686  (check);  Fordyce  v.  Kosminski,  49 
Ark.  40,  3  S.  W.  892,  4  Am.  St.  Rep.  18  (check);  Greenfield  Sav- 
ings Bank  v.  Stowell,  123  Mass.  196,  25  Am.  Rep.  67;  Holmes  v. 
Trumper,  22  Mich.  427,  7  Am.  Rep.  661;  National  Exchange  Bank 
of  Albany  v.  Lester,  194  N.  Y.  461,  87  N.  E.  779,  21  L.  R.  A.  (N.  S.) 
402.  See  "Banks  and  BanMng,'"  Dec.  Big.  {Key  No.)  §  1^8;  Cent. 
Dig.  §§  J,38-Jt52. 

106  4  Bing.  253.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  U8;  Cent.  Dig.  §§  Jt3S-J,52. 

106  Colonial  Bank  of  Australia  v.  Marshall,  22  L.  T.  R.  746.  See, 
also,  Scholfield  v.  Earl  of  Louudesborough  [1896]  A.  C.  514.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  iJS;  Cent.  Dig.  §§ 
Ji38--'i52. 

107  National  Exchange  Bank  of  Albany  v.  Lester,  194  N.  Y.  461, 
87  N.  E.  779,  21  L.  R.  A.  (N.  S.)  402.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  1J,8;    Cent.  Dig.  §§  438-452. 

lORTimbel  v.   Garfield  Nat.   Bank.  121   App.    Div.   870,  106  N.  T. 


§?  43-45)  FORGED    CHECKS  171 

the  negligent  maker  or  drawer  of  a  negotiable  instrument  is 
held  liable  even  to  a  bona  fide  holder,  a  fortiori  would  the 
negligent  draw-er  of  a  check  be  liable  to  the  bank  which  had 
been  misled  into  payment.  -*- 

Forged  Indorsement — Rights  of  Bank  Against  Drawer 

Where  a  bank  on  which  a  check  is  drawn  has  paid  it  to  one 
who  was  not  entitled  to  receive  payment,  because  he  was  not 
the  payee,  or  because  of  the  forgery  of  the  indorsement  of  the 
payee  or  of  an  indorsee,  the  payment  is,  of  course,  unauthor- 
ized, and  the  bank  may  not  charge  the  payment  to  the  account 
of  the  drawer,^""  unless  the  drawer  was  guilty  of  negligence 

Supp.  497;  Trust  Co.  of  America  v.  Conkliu,  G5  Misc.  Rep.  1,  119 
N.  Y.  Supp.  3G7. 

The  drawer  is  not  bound  so  to  prepare  the  check  that  no  one 
can  successfully  tamper  with  it.  Critten  v.  Chemical  Nat.  Bank, 
171  N.  Y.  219,  63  N.  E.  9G9,  57  L.  R.  A.  529.  See,  also,  Snyder 
V.  Corn  Exch.  Nat.  Bank,  221  Pa.  599,  70  Atl.  876,  128  Am.  St.  Rep. 
780.  See  "Banks  and  Banlcinff,"  Dec.  Dig.  (Key  No.)  §  U8;  Cent. 
Dig.  §§  J,38-J,52. 

108  Atlanta  Nat.  Bank  v.  Burke,  81  Ga.  597,  7  S.  E.  738,  2  L. 
R.  A.  96;  First  Nat.  Bank  of  Chicago  v.  Pease,  168  111.  40,  48  N. 
E.  160 ;  German  Savings  Bank  of  Davenport  v.  Citizens'  Nat.  Bank, 
101  Iowa,  530,  70  N.  W.  769,  63  Am.  St.  Rep.  399;  Rice  v.  Citizens' 
Nat.  Bank  (Ky.)  51  S.  W.  4.54;  Winslow  v.  Everett  Nat.  Bank,  171 
Mass.  534,  51  N.  E.  16;  Harmon  v.  Old  Detroit  Nat.  Bank,  153 
Mich.  73,  116  N.  W.  617,  17  L.  R.  A.  (N.  S.)  514,  126  Am.  St.  Rep. 
467;  Harter  v.  Mechanics'  Nat.  Bank,  63  N.  J.  Law,  578,  44  Atl. 
715,  76  Am.  St.  Rep.  224;  Bank  of  British  North  America  v.  Mer- 
chants' Nat.  Bank,  91  N.  Y.  106;  Kearny  v.  Metropolitan  Trust 
Co.,  110  App.  Div.  236,  97  N.  Y.  Supp.  274;  Id.,  186  N.  Y.  611, 
79  N.  E.  1108;  Gallo  v.  Brooklyn  Savings  Bank,  199  N.  Y.  222, 
92  N.  E.  633,  32  D.  R.  A.  (N.  S.)  66 ;  McNeely  Co.  v.  Bank  of  North 
America,  221  Pa.  588,  70  Atl.  891,  20  L.  R.  A.  (N.  S.)  79. 

If,  in  accordance  with  methods  of  doing  business  through  a 
clearing  house,  the  drawee  pays  on  a  guaranty  of  the  indorse-, 
ment  of  the  payee  by  a  responsible  bank,  this  does  not  affect  the 
duty  of  the  drawee  to  see  that  the  indorsement  is  genuine.-  Jordan 
Marsh  Co.  v.  National  Shawmut  Bank,  201  Mass.  397,  87  N.  E. 
740,  22  L.  R.  A.  (N.  S.)  250. 

The  depositor  cannot  recover  from  the  person  who  received  pay- 
ment as  for  moneys  received  for  the  depositor's  use.     Tlbby  Bros. 


172  PAYMENT  OF   CHECKS  (Ch.  4 

precluding-  him  from  setting  up  the  forgery  or  want  of  au- 
thority/^" or  by  his  subsequent  conduct  precludes  himself 
from  denying  the  right  of  the  bank  to  make  the  charge,  al- 
though this  can  seldom  happen  in  the  case  of  a  forged  indorse- 
ment.^^ ^ 
Same — Rights  of  Bank  Against  Payee 

Where  the  drawee  has  paid  a  check  to  one  who  had  no  title 
to  it  bv  reason  of  a  forged  indorsement,  the  bank  may  recover 
the  money  back  from  him.^^^  Where  the  money  has  been 
paid  to  a  collecting  bank  or  other  agent  of  such  a  holder,  or  of 
a  holder  of  an  altered  check,  if  the  agency  was  disclosed,  as 

Glass  Co.  V.  Farmers'  &  Mechanics'  Bank  of  Starpsburg,  220  Pa. 
1,  69  Atl.  2S0,  15  L.   R.  A.   (N.   S.)   519. 

Where,  after  payment  to  a  holder  under  a  forged  indorsement, 
the  draft  was  returned  to  the  drawer,  who  delivered  it  to  the  payee, 
and  he  demanded  payment,  which  was  refused,  and  the  drawer  then 
paid  the  draft  after  protest,  he  had  a  right  of  action  against  the 
bank.  Citizens"  Nat.  Bank  of  Davenport  v.  Importers'  &  Traders' 
Bank  of  New  York,  119  N.  Y.  195,  23.  N.  E.  540.  See  "Banks  and- 
Banlcing,"  Dec.  Dig.  {Key  No.)  §  148;   Cent.  Dig.  §§  438-452. 

110  See  cases  in  preceding  note. 

The  burden  is  on  the  bank  to  show  such  negligence.  Murphy  v.  - 
Metropolitan  Nat.  Bank,  191  Mass.  159,  77  N.  E.  693,  114  Am. 
St.  Rep.  595.  Where  the  agent  of  the  drawers  of  a  check  forged 
the  payee's  name  and  used  the  proceeds  to  se|;tle  a  shortage  in 
his  account  with  the  drawers,  it  was  held  that  since  the  pro- 
ceeds came  back  to  the  drawers,  and  the  agent's  debt  to  them  re- 
mained unpaid,  they  had  suffered  no  injury  and  could  not  recover 
from  the  drawee  paying  on  the  forged  instrument.  Andrews  v. 
Northwestern  Nat.  Bank,  107  Minn.  196,  117  N.  W.  621,  25  L.  R. 
A.  (N.  S.)  996;  post,  p.  175.  See  "Batiks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  148;   Cent.  Dig.  §§  438-452,  518,  519. 

111  Post,  p.  175. 

112  Wellington  Nat.  Bank   v.   Robbins,  71  Kan.   748,  8*1  Pac.  487, 
'  114  Am.  St.  Rep.  523 ;    Corn  Exch.  Bank  v.  Nassau  Bank,  91  N.  Y. 

74,  43  Am.  Rep.  G55 ;  Oriental  Bank  v.  Gallo,  112  App.  Div.  3G0, 
98  N.  Y.  Supp.  561;  Second  Nat.  Bank  of  Pittsburg  v.  Guarantee 
Trust  &  Safe  Deposit  Co.,  206  Pa.  616,  56  Atl.  72;  Star  Fire  Ins. 
Co.  V.  New  Hampshire'  Nat.  Bank.,  60  N.  H.  442.  See,  also,  Mac- 
I)eth  V.  North  &  South  Wales  Bank,  24  L.  T.  R.  5,  397.  See  "Banks 
ami   Banking r  Dec.   Dig.   {Keg   No.)   §  147;    Cent.  Dig.   §§   488-452. 


§§  43-45)  FORGED   CHECKS  173 

by  an  iiKlorscmeut  to  the  agent  "for  collection,"  the  drawee's 
right  of  action  is  against  the  principal,  and  payment  over  by 
the  agent  before  notice  of  the  mistake  is  a  defej»«e;^"  but 
if  the  agency  was  not  disclosed,  the  right  of  action  is  against 
the  agent,  and  he  is  liable,  although  he  may  have  paid  the 
money  over  to  his  principal. ^^* 

Same — Rights  of  True  Holder 

\\'here  the  drawee  has  so  paid  a  check  under  a  forged  in- 
dorsement, the  drawer,  of  course,  still  remains  liable  thereon 
to  the  true  holder,  whose  indorsement  was  forged.  Although 
the  person  who  received  payment  was  a  bona  fide  purchaser 
of  the  check,  he  was  nevertheless  thereby  guilty  of  a  conver- 
sion, for  which  he  was  liable  in  damages  to  the  true  owner, 
and,  having  obtained  the  money  by  means  of  the  check,  he  is 
liable  to  the  true  owner  in  an  action  for  money  had  and  re- 
ceived.^ ^^ 

Same — Fictitious  Payee 

The  Negotiable  Instruments  Law  provides  that  an  instru- 
ment is  payable  to  bearer  "when  it  is  payable  to  the  order  of 

113  National  Park  Bank  of  New  York  v.  Seaboard  Bank,  114  N.  Y. 
28,  20  N.  E.  632,  11  Am.  St.  Rep.  012 ;  National  City  Bank  of  Brook- 
lyn V.  Westcott,  118  N.  ¥.  4G8.  23  N.  E.  900.  16  Am.  St.  Rep.  771 ; 
United  States  v.  American  Exch.  Nat.  Bank  (D.  C.)  70  Fed.  232.  See, 
also,  Crocker-Woolworth  Nat.  Bank  v.  Nevada  Bank,  139  Cal.  564,  73 
Pac.  456,  63  L.  E.  A.  245,  96  Am.  St.. Rep.  109.  See  ''Banks  and  Bank- 
ing," Dec.  Dig.  {Key  J^'o.)  §  lJf8;    Cent.  Dig.  §§  ^38-452. 

114  First  Nat.  Bank  of  Minneapolis  v.  City  National  Bank,  182 
Mass.  130,  65  N.  E.  24,  94  x\m.  St.  Rep.  637;  Canal  Bank  v.  Bank 
of  Albany,  1  Hill  (N.  Y.)  287.  See  ''Banks  and  Banking,"  Dec.  Dig. 
{Key  ]S:o.)  §  i^7;    Cetit.  Dig.  §§  438-^52. 

ii5Bobbett  V.  Pinkett,  1  Ex.  D.  308;  Buckley  v.  Second  Nat. 
Bank  of  Jersey  City,  35  N.  J.  Law,  400,  10  Am.  Rep.  249 ;  Johnson 
V.  First  Nat.  Bank  of  Hoboken,  6  Hun  (N.  Y.)  124 ;  Salomon  v.  State 
Bank,  28  Misc.  Rep.  324,  59  N.  Y.  Supp.  407;  Ellery  v.  People's 
Bank  (Sup.)  114  N.  Y.  Supp.  108;  Farmer  v.  People's  Bank,  100 
Tenn.  187,  47  S.  W.  234;  Knoxville  Water  Co.  v.  East  Tennessee 
Nat.  Bank  (Tenn.)  131  S.  W.  447.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  A^o.)  §  174;  Cent.  Dig.  §§  629-633;  "Bills  and  Notes." 
Dec.   Dig.  {Key  No.)  §  881;    Cent.  Dig.  §§  99.',,  .0.0.7. 


174  PAYMENT  OF  CHECKS  (Ch.  4 

a  fictitious  or  nonexisting  person,  and  such  fact  was  known 
to  the  person  making  it  so  payable."  ^^^  Under  this  provision, 
as  formerly  in  this  country/^'  the  intent  of  the  drawer  deter- 
mines whether  a  check  is  payable  to  bearer,  or  requires  the 
signature  of  the  payee  named,  although  he  may  be  in  ia.(;t, 
but  unknown  to  the  drawer,  fictitious  or  nonexisting.  There- 
fore, if  the  drawer  does  not  actually  intend  that  the  payee 
named  shall  receive  and  be  entitled  to  payment  of  the  check, 
payment  by  the  bank  without  his  indorsement,  or  with  an  in- 
dorsement by  another  hand,  is  authorized,  and  the  bank  may 
charge  the  drawer.^  ^^  But  if  the  drawer  is  induced  to  make 
a  check  to  a  payee  therein  named,  intending  payment  to  be 
made  only  to  him  .or  to  his  order,  payment  to  any  other  per- 
ns Negotiable  Instruments  Law,  §  9  (3). 

117  Armstrong  v.  Pomeroy  Nat.  Bank,  46  Ohio  St.  512,  22  N.  E. 
866,  6  L.  R.  A.  625,  15  Am.  St.  Rep.  655;  Sliipman  v.  Bank  of 
the  State  of  New  York,  126  N.  T.  318,  27  N.  E.  371,  12  L.  R.  A.  791, 
22  Am.  St.  Rep.  821  (former  statute) ;  Phillips  v.  Mercantile  Nat. 
Bank,  140  N.  Y.  556,  35  N.  E.  982.  23  L.  R.  A.  584,  37  Am.  St.  Rep. 
596  (former  statute).  See  "Bilh  and  Notes,"  Dec.  Dig.  {Key  No.)  §§ 
6,  60;   Cent.  Diff.  §§  8,  85-9J,. 

118  Snyder  v.  Corn  Exch.  Nat.  Bank,  221  Pa.  599,  70  Atl.  876, 
128  Am.  St.  Rep.  780. 

The  name  of  the  drawer  of  checks  purporting  to  have  been  signed 
by  an  administrator,  payable  to  beneficiaries  of  the  estate  entitled 
to  greater  amounts  from  the  estate  than  the  amounts  payable, 
was  forged.  The  checks  were  accepted  and  paid  by  the  drawee 
to  a  bank  with  which  they  had  been  deposited,  the  names  of  the 
payees  appearing  as  indorsed  thereon.  It  did  not  appear  who 
forged  the  drawer's  name,  but  the  person  who  did  so  knew  that 
the  payees  would  never  have  any  interest  in  the  checks.  Held,  that 
the  drawee  could  not  recover  the  money  paid,  since  it  was  bound 
to  know  the  signature  of  the  drawer,  and  the  payee  was  fictitious 
within  the  statute.  Trust  Co.  of  America  v.  Hamilton  Bank  of 
New  York,  127  App.  Div.  515,  112  N.  Y.  Supp.  84.  See,  also,  Bank 
of  England  v.  Vagliano  Bros.  [1891]  A.  Cas.  107.  But  see  First 
Nat.  Bank  of  Chicago  v.  Northwestern  Nat.  Bank,  152  111.  296,  38 
N.  E.  739,  26  L.  R.  A.  289,  43  Am.  St.  Rep.  247.  See  "Banks  and 
Banl:in{j,"  Dec.  Dig.  {Key  No.)  §  l.'fS;   Cent.  Dig.  §§  I,38-If52. 


§§  43-45)  FORGED   CHECKS  175 

son,  even  though  no  such  person  as  the  payee  existed,  is  un- 
authorized.^^" 

Same — Fraudulent  Impersonation  ^, 

Where  an  impostor  fraudulently  impersonates  another  per- 
son, and  thereby  induces  a  third  person  to  draw  a  check,  des- 
ignating the  payee  by  the  name  assumed  by  the  impostor,  and 
to  deliver  the  check  to  him  in  the  belief  that  the  drawer  is 
dealing  with  the  person  whose  name  has  been  assumed,  and 
the  impostor  indorses  the  check  in  the  assumed  name,  and  the 
drawee  bank  in  good  faith  pays  it  to  him  or  to  an  indorsee, 
the  bank  is  protected,  and  may  charge  the  payment  to  the 
drawer.^^"  And  if  the  impostor  transfers  the  check  so  indorsed 
to  a  bona  fide  purchaser,  he  takes  title  thereby  and  can  hold 
the  drawer.^^^  These  cases  cannot  be  explained  on  the  ground 
that  the  payee  is  fictitious,  since  the  check  is  not  payable  to 
the  order  of  a  fictitious  person,  to  the  knowledge  of  the  draw- 
er; nor  on  the  ground  of  the  drawer's  negligence,  since  the 
holding  is  the  same  where  he  exercises  all  reasonable  care. 

119  Jordan  Marsh  Co.  v.  National  Shawmut  Bank,  201  Mass.  397, 
87  N.  E.  740,  22  L.  R.  A.  (N.  S.)  250.  See.  also,  Harmon  v.  Old 
Detroit  Nat.  Bank,  153  Mich.  73,  116  N.  W.  617,  17  L.  R.  A.  (N.  S.) 
514,  126  Am.  St.  Rep.  467.  See  "Banks  and  Banking;'  Dec.  Dig. 
{Key  :No.)  §  11,8;   Cent.  Dig.  §§  J,38-},52. 

120  United  States  v.  National  Exchange  Bank  (C.  C.)  45  Fed.  163; 
Meyer  v.  Indiana  Nat.  Bank,  27  lud.  App.  354,  61  N.  E.  596;  Hoff- 
man V.  American  Exch.  Nat.  Bank,  2  Neb.  (Unof .)  217,  96  N.  W. 
112.  See,  also,  Metzger  v.  Franklin  Bank,  119  Ind.  359,  21  N.  E. 
973;  Emporia  Nat.  Bank  v.  Shotwell,  35  Kan.  360,  11  Pac.  141, 
57  Am.  Rep.  171;  First  Nat.  Bank  of  Ft.  Worth. v.  American  Exch. 
Nat.  Bank,  170  N.  T.  88,  62  N.  E.  1089. 

Where  the  bank  has  paid  to  a  purchaser,  since  the  drawer  had 
no  claim  against  the  bank,  the  bank  had  none  against  the  purchaser. 
Land  Title  &  Trust  Co.  v.  Northwestern  Nat.  Bank,  196  Pa.  230, 
46  Atl.  420,  50  L.  R.  A.  75,  79  Am.  St.  Rep.  717.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  1J,S;   Cent.  Dig.  §§  Jt38-ff52. 

121  Robertson  v.  Coleman,  141  Mass.  231,  4  N.  E.  619,  55  Am.  Rep. 
471;    Burrows  v.  Western  Union  Tel.  Co.,  86  Minn.  499,  90  N.  W.  . 
1111,  58  L.  R.  A.  433,  91  Am.  St.  Rep.  380;    Heavy  v.  Commercial 
Nat.  Bank,  27  Utah,  222,  75  Pac.  727,  101  Am.  St.  Rep.  966 ;    Jamie- 
son  &  McFarland  v.  Heim,  43  Wash.  153,  86  Pac.  165.     See  "Banks 


176  PAYMENT  OF  CHECKS  (Ch.  4 

The  cases  are  usually  explained  on  the  ground  that  the  person 
to  whom  the  check  is  delivered,  though  designated  by  the  name 
of  another,  is  the  person  with  whom  the  drawer  is  dealing  and 
to  whom  he  intends  the  check  to  be  paid,  so  that  in  paying  it 
the  bank  carries  out  his  intention.  This  explanation  is  open 
to  the  criticism  that,  while  the  drawer  does  intend  payment  to 
be  made  to  the  person  to  w^hom  he  delivers  the  check,  he  also 
intends  that  it  shall  be  made  to  the  person  impersonated ;  but, 
whatever  the  explanation,  the  courts,  with  one  exception,^" 
have  Uniformly  held  that  the  drawer  is  in  effect  precluded 
from  asserting  a  different  intention  than  that  attributed  to 
him.  The  Negotiable  Instruments  Law  provides:  "When  a 
signature  is  forged  or  made  without  the  authority  of  the  per- 
son w'hose  signature  it  purports  to  be,  it  is  wholly  inopera- 
tive, and  no  right  to  retain  the  instrument,  or  to  give  a  dis- 
charge therefor,  or  to  enforce  payment  thereof  against  any 
party  thereto,  can  be  acquired  through  or  under  such  signa- 
ture, unless  the  party  against  whom  it  is  sought  to  enforce  such 
right  is  precluded  from  setting  up  the  forgery  or  want  of  au- 
thority." ^'^  It  seems  clear  that  the  cases  under  consideration 
fall  within  the  above  exception,  and  that  the  drawer  is  "pre- 
cluded from  setting  up  the  forgery  or  want  of  authority,"  and 
it  has  been  so  held,^"*  though  not  without  dissent.^-^ 

and  Banking;'  Dec.  Dig.  (Key  No.)  §  IJfS;  Cent.  Dig.  §§  J,38-452; 
-Bills  and  Notes,"  Dec.  Dig.  (Keij  No.)  §§  373-377;  Cent.  Dig.  §§ 
952,  966-992. 

i22Tolman  v.  American  Nat.  Bank,  22  B.  I.  462,  48  Atl.  4S0, 
52  L.  R.  A.  877,  84  Am.  St.  Rep.  S50.  See  ''Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  i.J8;    Cent.  Dig.  §§  43S-J,52. 

12  3  Negotiable  Instruments  Law,  §  23. 

124  Hoffman  v.  American  Exch.  Nat.  Bank,  2  Neb.  (Unof.)  217, 
96  N.  W,  112.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  1^8; 
Cent.  Dig.  §§  J,38-J,52. 

125  The  contrary  was  held,  both  under  this  section  and  at  com- 
mon law,  in  Tolman  v.  American  Nat.  Bank,  22  R.  I.  402,  48  Atl. 
480,  o2  L.  R.  A.  877,  84  Am.  St.  Rep.  8.jO.  See  comments  on  this 
case  by  Dean  James  Barr  Ames  and  Mr.  Charles  L.  McKeeuan, 
Brannan,  Neg.  Inst.  Law,  pp.  95,  125-131.  See  "Banks  and  Banking," 
Deo.  Dig.  (Key  No.)  §  i',8;    Cent.  Dig.  §§  -',3S-Jt52. 


46)  CLEARING   HOUSES  177 


CHAPTER  V 
CLEARING    HOUSES  "*" 

4f .  Cleaving  House  System. 

47.  Effect   of   Fayment  Through    Clearing   House. 

48.  Effect  of  Rules — Non-Members. 

49.  Cleajing  House  Certificates. 


CLEARING  HOUSE  SYSTEM 

46.  In  commercial  centers  the  adjustment  and  payment  of 
daily  balances  between  banks  is  usually  effected  by 
means  of  clearing  house  associations,  of  which  the 
several  banks  are  members,  at  the  clearing  house, 
or  central  office,  of  the  association,  where  the  rep- 
resentatives of  the  several  banks  meet  daily,  and 
where  each  bank  turns  in  and  is  credited  with  all 
checks  and  cash  demands  which  it  holds  against 
the  other  banks,  and  is  charged  with  all  such  de- 
mands against  itself  turned  in  by  the  others,  and 
where  each  bank  pays  or  receives,  as  the  case  may 
be,  the  balance  found  to  be  owed  by  or  due  to  it, 
subject  to  subsequent  adjustment  directly  between 
the  banks  immediately  concerned  of  items  found 
not  good. 

In  all  large  cities  the  adjustment  and  payment  of  daily  bal- 
ances between  banks  is  effected  through  the  clearing  house, 
by  means  of  associations  formed  for  that  purpose,  of  which 
the  several  banks  are  members.  Under  this  system  there  is 
a  meeting  each  morning  at  the  central  office  or  clearing  house 
of  the  clerks  representing  the  several  banks,  and  each  bank 
turns  in  all  the  checks  and  cash  demands  which  it  holds  against 
the  others  and  receives  credit  therefor,  while  it  is  charged  with 
all  checks  and  cash  demands  against  itself  turned  in  by  the 
Tiff.Bks.&B.— 12 


178  CLEARING  HOUSES  (Ch.  5 

other  banks.  The  checks  and  demands  which  have  thus  been 
credited  to  and  charged  against  each  bank  are  then  summed 
up,  and  the  balance  owed  by  or  due  to  each,  as  the  case  may 
be,  is  then  ascertained.  At  a  later  hour  each  bank  pays  to  or 
receives  from  the  clearing  house  the  balance  found  to  be 
against  it  or  in  its  favor,  and  the  total  transactions  are  thus  set- 
tled by  the  actual  payment  of  a  comparatively  small  amount 
of  cash.^"  In  this  daily  settlement  of  the  clearing  house  no  ac- 
count is  taken  of  the  fact  that  checks  may  be  bad ;  but  all 
checks  and  drafts  on  any  bank  or  notes  payable  at  the  bank  are 
charged  against  it,  though  the  accounts  of  the  drawers  of  the 
checks  or  makers  of  the  notes  may  not  be  good,  and  though  the 
instruments  may  be  forgeries.  The  adjustment  of  these  items 
is  usually  effected,  not  through  the  clearing  house,  but  di- 
rectly between  the  bank  which  turned  in  any  such  paper  and 
the  bank  on  which  it  was  drawn  or  at  which  it  was  payable. 

The  rules  of  all  clearing  house  associations  are  by  no  means 
identical ;  ^  but  the  procedure  outlined  is  that  generally  adopt- 
ed.^ In  substance,  the  system  "substitutes  a  settlement  made 
at  a  fixed  place  and  time  each  day  by  representatives  of  all  the 
members  of  the  association  in  the  place  of  a  separate  settle- 
ment by  each  bank  with  every  other  made  over  the  counter."  * 

Clearing  house  associations  are  ordinarily  merely  voluntary 
associations  entered  into  for  the  purpose  of  settling  daily  bal- 


1  See  Dunbar,  Theory  &  Hist,  of  Banking,  43,  52. 

2  See  Rector  v.  City  Deposit  Bank  Co.,  200  U.  S.  405,  26  Sup.  Ct. 
289,  50  L.  Ed.  527 ;  Blaffer  v.  Louisiana  Nat.  Bank,  35  La.  Ann.  251. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  318,  320;  Cent.  Dig. 
§§  1224,  1226. 

»  See  Merchants'  Nat.  Bank  v.  National  Eagle  Bank,  101  Mass.  281, 
100  Am.  Dec.  120;  Mt.  Morris  Bank  v.  T\yenty-Thi,i-(1  Ward  Bank, 
172  N.  Y.  244,  G4  N.  E.  810;  Philler  v.  Patterson,  168  Pa.  46^,  32  Atl. 
26,  47  Am.  St.  Rep.  896.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
Xo.)  §  320;  Gent.  Dig.  §  1226. 

*  Philler  v.  Patterson,  168  Pa.  468,  32  Atl.  26,  47  Am.  St.  Rep.  896. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  318,  320;  Cent. 
Dig.  §§  122 J/,  1226. 


§  47)       EFFECT  OF  PAYMENT  THROUGH  CLEAKING  HOUSE        179 

ances  between  the  members.'^  The  associations  are  managed 
by  a  committee  or  other  officers,  as  may  be  provided  by  the 
constitution  and  rules."  _^ 


EFFECT  OF  PAYMENT  THROUGH  CLEARING 
HOUSE 

47.  Where  a  rule  provides  that  checks  included  in  the  clear- 
ing house  settlement  which  are  found  not  to  be 
good  shall  be  returned  by  the  bank  receiving  them 
to  the  bank  from  which  they  were  received,  before 
a  certain  hour,  the  return  of  a  check  within  such 
time  is  equivalent  to  a  refusal  to  pay  it.  If  a  check 
be  not  returned  within  such  time,  the  settlement 
becomes  operative  as  payment,  with  the  same  effect 
as  if  payment  had  been  made  over  the  counter  of 
the  drawee  bank;  but  in  some  jurisdictions  it  is 
held  that  if  the  drawee,  because  of  its  mistaken 
belief  that  the  drawer's  funds  are  sufficient,  fails 
to  return  such  check  within  such  time,  it  may  upon 
afterwards  discovering  its  mistake  return  the  check 
and  require  the  other  bank  to  refund  the  payment, 
unless  the  latter  before  notice  of  the  mistake  has 
changed  its  position,  so  that  it  would  suffer  loss 
if  required  to  rectify  the  mistake. 

5  See  Yardley  v.  Pbiller,  167  U.  S.  344,  17  Sup.  Ct.  835,  42  L.  Ed. 
192. 

Such  an  association,  though  it  issue  certificates  for  use  in  payment 
between  its  mem1)ers,  is  not  itself  a  bank.  Crane  v.  Fourth  St.  Xat. 
Bank,  173  Pa.  566,  34  Atl.  296.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  Xo.)  §  S18;  Cent.  Dig.  §  122J,. 

6  See  Yardley  v.  Pbiller,  167  U.  S.  344,  17  Sup.  Ct.  835,  42  L.  Hd. 
192. 

The  association  is  properly  sued  in  the  names  of  the  committee 
having  control  of  its  business,  funds,  and  securities.  Yardley  v. 
Pbiller  (O.  C.)  58  Fed.  746.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §§  318-320;  Cent.  Dig.  §§  122.^-1226. 


130  CLEAUIXG   HOUSES  (Ch-  •> 

As  already  stated,  in  the  settlement  through  the  clearing 
house  no  account  is  taken  of  the  fact  that  the  checks  may  be 
bad,  and  the  settlement  of  such  checks  or  other  items  is  ef- 
fected directly  between  the  drawee  bank  and  the  bank  which 
presented  the  paper.  Usually  it  is  provided  by  the  rules  that 
checks  which  are  found  not  good  shall  be  returned  by  the  banks 
receiving  them  to  the  banks  from  which  they  were  received  be- 
fore a  certain  hour  on  the  same  day.'' 

If  a  check  is  returned  within  the  time  fixed  by  the  rule,  this 
is,  of  course,  equivalent  to  a  refusal  to  pay.«  On  the  other 
hand,  if  a  check  is  not  returned  within  the  time  so  fixed,  it 
would  naturally  follow  that  the  settlement  would  become  oper- 
ative as  payment,  with  the  same  effect- as  if  payment  had  been 
made  in  cash  over  the  counter  of  the  bank.  In  this  view  such 
payment  would  not  prevent  the  drawee  bank,  in  the  absence 
of  special  circumstances,  from  recovering  back  the  money  if 
the  payment  had  been  made  under  a  forged  indorsement,^  or 
if  the  check  had  been  altered  ;^°  but  it  would  prevent  a  re- 
covery from  a  bona  fide  holder  if  the  mistake  of  the  drawee 

7  The  rule  of  the  New  York  clearing  house  that  such  items  shall 
be  returned  the  sarpe  day  to  the  bank  from  which  they  were  receiv- 
ed, which  shall  immediately  refund,  is  not  repealed  by  a  later  provi- 
sion that  in  case  of  the  failure  of  the  bank  to  refund  the  other  bank 
may  report  the  fact  to  the  manager  of  the  clearing  house,  who  shall, 
with  the  approval  of  the  committee,  readjust  the  clearing  house 
statement,  and  declare  the  correct  balance  between  such  banks,  pro- 
vided the  report  be  made  before  1  o'clock  the  same  day.  The  bank 
which  has  been  charged  with  such  paper  may  seek  reclamation  di- 
rectly from  the  other  bank.  Mt.  Morris  Bank  v.  Twenty-Third  Ward 
Bank,  172  N.  Y.  244,  64  N.  E.  810.  8ce  "Banks  and  BanJcing,"  Dec. 
Dig.  (Key  No.)  §§  319,  320;  Cent.  Dig.  §§  1225,  1226. 

8  Fernandez  v.  Glynn,  1  Camp.  420,  note ;  German  Nat.  Bank  v. 
Farmers'  Deposit  Nat.  Bank,  118  Pa.  294,  12  Atl.  303.  See  ''Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  320;  Cent.  Dig.  §  1226. 

»  Ante,  p.  172. 

10  Ante,  p.  167.  See  Crocker-Woolworth  Nat.  Bank  v.  Nevada 
Bank.  1.39  Cal.  .^04,  73  Pac.  4aG,  63  L.  R.  A.  245,  96  Am.  St.  Rep.  169. 
8i:c  "Banks  ami  Banking,"  Dec.  Dig.  (Key  No.)  §  320;  Cent.  Dig.  § 
1220. 


§47)       EFFECT  OF  PAYMENT  THROUGH  CLEARINGHOUSE        181 

had  been  in  failing-  to  discover  that  the  signature  of  the  draw- 
er was  forged/^  unless  the  holder  was  one  who  by  bad  faith 
or  misconduct  had  contributed  to  the  success  of  the  frafcrd  or  to 
the  mistake.^-  Indeed,  it  has  been  held  in  Pennsylvania  that  a 
rule  requiring  checks  "not  good"  to  be  returned  before  a  desig- 
nated hour  applied  only  to  checks  not  good  because  of  the  in- 
sufficiency of  the  drawer's  funds.^^ 

In  the  view  that  if  a  check  be  not  returned  within  the  time 
limited  the  settlement  operates  as  payment,  if  the  drawee  bank 
failed  to  return  within  the  time  a  check  which  was  not  good 
because  of  the  insufficiency  of  the  drawer's  funds,  no  recovery 
on  that  ground  could  thereafter  be  had,  even  if  the  bank  had 
failed  to  act  under  the  mistaken  belief  that  the  funds  were  suf- 
ficient. This  result  logically  follows,  at  least  in  those  jurisdic- 
tions where  it  is  held  that,  if  the  drawee  bank  pays  a  check 
m  the  mistaken  belief  that  the  drawer's  funds  are  suffixient,  it 
cannot  afterwards  correct  the  mistake  and  recover  the  amount 
from  the  payee  upon  the  ground  of  a  mistake  of  fact.^*     In 

11  Ante,  p.  161;  Commercial  &  Farmers'  Nat.  Bank  of  Baltimore 
V.  First  Nat.  Bank  of  Baltimore,  30  Md.  11,  90  Am.  Dec.  5.54 ;  Ded- 
ham  Nat.  Bank  v.  Everett  Nat.  Bank,  177  Mass.  392,  59  N.  E.  62, 
S3  Am.  St.  Rep.  286. 

So  held,  tbough  the  payee  bank  was  not  injured  by  the  delay,  un- 
der a  clearing  house  rule  that  checks  not  returned  before  2  o'clock 
should  be  deemed  to  have  been  paid  with  like  effect  as  though  paid  in 
currency  at  that  hour  over  the  counter  of  the  bank  on  which  it  was 
cleared.  National  Bank  of  Commerce  in  St.  Louis  v.  Mechanics' 
American  Nat.  Bank,  148  Mo.  App.  1,  127  S.  W.  429.  See  ''Banks 
and  Bankinf/,"  Dec.  Dig.  (Kenj  No.)  §  320;  Cent.  Dig.  §  1226. 

12  National  Bank  of  North  America  v.  Bangs,  100  Mass.  441,  8  Am. 
Rep.  349.  See  "Banks  and  Banking,'"  Dec.  Dig.  {Key  Islo.)  §  320; 
Cent.  Dig.  §  1226. 

13  Tradesmen's  Nat.  Bank  v.  Third  Nat.  Bank,  60  Pa.  430;  Corn 
Exchange  Nat.  Bank  v.  National  Bank  of  Republic,  78  Pa.  '233. 

In  these  cases  the  drawer's  signature  was  forged,  and  recovery  by 
the  drawee  was  allowed  under  a  statute.  See  "Banks  and  Banking" 
Dec.  Dig.  {Key  No.)  §  320;  Cent.  Dig.  §  1226. 

14  Ante,  p.  149. 

The  Chicago  rule  provided  that  checks  "not  found  good  are  to  be 


182  CLEARING  HOUSES  (Ch.  5 

Massachusetts  and  New  York,  however,  it  has  been  held  that 
such  a  mistake  may  be  corrected,  ahhough  the  check  be  not  re- 
turned within  the  time  Hmited,  unless  the  bank  which  present- 
ed the  check  has  changed  its  position  before  notice  of  the  mis- 
take, as  by  paying  the  amount  over  to  an  owner  who  had  de- 
posited the  check  for  collection.  The  question  in  Massachu- 
setts arose  under  the  rules  of  the  Boston  clearing  house  which 
provided:  "Whenever  checks  are  sent  through  the  clearing 
house  which  are  not  good,  they  shall  be  returned  by  the  banks 
receiving  the  same,  to  the  banks  from  which  they  were  receiv- 
ed, as  soon  as  it  shall  be  found  that  said  checks  are  not  gocftl : 
and  in  no  case  shall  they  be  retained  after  1  o'clock."  In  a  case 
where  certain  checks,  having  been  discovered  to  be  not  good, 
were  handed  by  the  teller  of  the  drawee  bank  at  12 :45  p.  m. 
to  the  messenger,  with  direction  to  return  them  and  to  collect 
the  amounts  from  the  banks  from  which  they  had  been  re- 
ceived, but  owing  to  a  mistake  of  the  messenger  as  to  the  num- 
ber of  one  of  the  checks  he  went  to  the  wrong  bank,  in  con- 
sequence of  which  the  check  was  not  returned  to  the  proper 
bank  until  1 :07  p.  m.,  it  was  held  that  the  drawer  bank  could 
recover  back  the  amount. ^°  The  court  said:  "Under  this  ar- 
rangement, the  payment  *  *  *  must  be  regarded  as  only 
provisional  until  the  hour  of  1  o'clock,  to  become  complete  only 
in  case  the  check  is  not  returned  at  that  time.  And  if  by  any 
mistake  of  fact  the  return  of  the  check  is  not  then  made,  then, 

returned  the  same  day  received,  before  1:30  o'clock  p.  m.,  to  the 
member  from  whom  received,  who  shall  immediately  reimburse  the 
holder  of  the  same."  At  1:42  p.  m.  the  drawer  discovered  that  the 
check  was  not  good,  and  returned  it  at  2:15,  and  it  was  held  that 
it  could  not  recover  back  the  amount.  Preston  v.  Canadian  Bank  of 
Commerce  (D.*C.)  23  Fed.  179.  See  Blaffer  v,  Louisiana  Nat.  Bank, 
35  I>a.  Ann.  251.  See,  also,  dissenting  opinion  of  Ingraham,  J.,  in 
Citizens'  Central  Nat.  Bank  v.  New  Amsterdam  Nat.  Bank,  128  App. 
Div.  554,  112  N.  Y.  Supp.  973.  See  ''Banks  and  Banlcing,"  Dec.  Dig. 
(Key  No.)  §  320;  Cent.  Dig.  §  1226. 

15  Merchants'  Nat.  Bank  v.  National  Eagle  Bank,  101  Mass.  2S1, 
100  Am.  Dec.  120.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
S20,-  Cent.  Dig.  §  1226. 


§  4:7)       EFFECT  OF  PAYMENT  THROUGH  CLEARING  HOUSE        183 

as  between  the  two  banks,  it  is  to  be  treated  as  payment  made 
under  a  mistake  of  fact,  precisely  to  the  same  extent,  and  with 
the  same  right  to  reclaim,  which  would  have  existedJi  the  pay- 
ment had  been  made  by  the  simple  act  of  passing  the  money 
across  the  counter  directly  to  the  payee  on  presentation  of  the 
check.  The  manifest  purpose  of  the  provision  is  to  fix  a  time 
at  which  the  creditor  bank  may  be  authorized  to  treat  the  check 
as  paid,  and  be  able  to  regulate  its  relations  to  other  parties." 
To  this  general  statement  no  exception  can  be  taken,  but  in  its 
application  it  is  submitted  that  there  was  error,  for  the  court 
declared  that  money  paid  to  the  holder  of  a  check  drawn  with- 
out funds  may  be  recovered  back,  if  paid  by  the  drawee  under 
a  mistake  of  fact,  and  that  if  the  plaintiff  had  paid  the  check 
at  its  counter  under  such  a  mistake  of  fact  it  could  have  main- 
tained the  action.  And  in  a  later  Massachusetts  case  ^^  the 
same  rule  was  applied  where  the  discovery  of  the  mistake  did 
not  occur  until  after  the  hour  for  returning  the  check.  "The 
rule,"  said  the  court,  "authorizes  the  bank  receiving  the  check, 
after  1  o'clock  arrives  and  the  check  is  not  returned,  to  treat 
it  in  all  transactions  as  if  it  were  good.  If,  therefore,  the  bank 
changes  its  position,  it  will  suffer  no  loss  by  reason  of  it.  On 
the  other  hand,  if  the  mistake  is  discovered  after  1  o'clock,  and 
the  bank  *  *  *  has  not  changed  its  position  by  reason  of 
the  expiration  of  the  time,  it  should  rectify  the  mistake  when 
reasonable  care  has  been  exercised  by  the  bank  on  which  it  was 


16  Mercliants'  Nat.  Bank  v.  National  Bank,  139  Mass.  513,  2  N. 
E.  89. 

Where  the  bank  paid  without  examination  of  the  drawer's  account, 
this  was  not  payment  under  a  mistake  of  fact,  but  simply  laches,  and 
the  bank  could  not  recover.  Boylston  Nat.  Bank  v.  Itichardson,  101 
Mass.  287. 

If  the  drawee  bank  fails  to  return  a  check  within  the  time  limited, 
knowing  that  the  drawer's  account  is  not  good,  though  in  the  expecta- 
tion that  it  will  be  made  good,  this  is  not  a  mistake  of  fact  entitling 
it  to  recover.  Atlas  Nat.  Bank  v.  National  Exch.  Bank,  176  Mass. 
300,  57  N.  E.  606.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  320;  Cent.  Dig.  §  1226. 


184  CLEARING  HOUSES  (Ch.  5 

drawn."  The  question  in  New  York  was  presented  under  a 
rule  which  provided:  "Return  of  checks,  drafts,  etc.,  for  in- 
formaHty,  not  good,  missent,  guarantee  of  indorsements  or 
for  any  other  cause,  should  be  made  before  3  o'clock  of  the 
same  day."  ^Vllere  the  plaintiff  returned  by  its  messenger  a 
check  found  not  good,  but  the  check  did  not  reach  the  other 
bank  until  a  few  minutes  after  the  hour,  it  was  held,  following 
the  Massachusetts  cases,  that  the  plaintiff  could  recover.^^ 


EFFECT  OF  RULES— NON-MEMBERS 

48.  The  members  of  a  clearing  house  association  may  make 
such  rules,  as  between  themselves,  for  the  conduct 
of  their  business,  as  they  see  fit;  but  such  rules 
do  not  affect  the  rights  of  those  who  are  not  mem- 
bers, unless  they  contract  with  reference  to  the 
rules. 

The  members  of  a  clearing  house  association  may  make  such 
rules,  as  between  themselves,  for  the  conduct  of  their  business, 
as  they  see  fit.^*  Such  rules  can,  in  general,  have  no  effect 
upon  rights  of  outsiders.^®    To  the  regulations  of  the  associa- 

17  Citizens'  Central  Nat.  Bank  v.  New  Ajjisterdam  Nat.  Bank,  12S 
App.  Div.  554,  112  N.  Y.  Supp.  973,  affirmed  198  N.  Y.  520,. 92  N.  E. 
1080.  See  "BanJcs  and  Bankin</,"  Dec.  Dig.  {Key  No.)  §  320;  Cent. 
Dig.  §  1226. 

18  Atlas  Nat.  Bank  v.  National  Exch.  Bank,  176  Mass.  300,  57  N.  E. 
605 ;  O'Brien  v.  Grant,  14G  N.  Y.  163,  40  N.  E.  871,  28  L.  R.  A.  361. 

The  members  may  bind  themselves  by  rules  governing,  as  between 
themselves,  the  effect  of  their  indorsements.  Crocker-Woolworth 
Nat.  Bank  v.  Nevada  Bank,  139  Cal.  5G4,  73  Pac.  456,  63  L.  R.  A.  245, 
96  Am.  St.  Rop.  169.  See  "Banks  and  Banking,"  Dec.  Dig,  (Key  No.) 
§  319;  Cent.  Dig.  §  122o. 

19  See  National  Union  P.ank  v.  Earle  (C.  C.)  93  Fed.  330. 

The  rules  do  not  affect  the  relations  bet'veen  the  payee  of  a  check 
presented  through  the  clearing  house  and  the  drawee.  People  v.  St. 
Nicholas  Bank,  77  Hun,  159.  28  N.  Y.  Supp.  407. 

Where  a  hank  to  which  a  draft  liad  bef-n  indorsed  "for  collection" 


§  48)  EFFECT    OF    RULES — NON-MEMBERS  185 

tion  the  customers  of  the  banks  arc  not  parties,  and  they  are 
not  in  a  situation  to  claim  the  benefit  of  tliem,  nor  are  they 
liable  to  be  affected  by  them.-''  A  bank  which  is  not-ftinember 
may,  however,  employ  a  bank  which  is  a  member  to  clear  for 
it,  and  when  such  a  contract  is  entered  into  with  reference  to 
the  rules  the  rights  and  obligations  of  the  parties  are  subject 
to  the  rules. -^  Thus  where,  in  accordance  with  the  rules  of  the 
New  York  clearing  house,  an  agreement  was  made  between  a 
member  and  a  non-member  of  the  association,  the  latter  depos- 


was  closed  before  the  clearing  house  settlement  was  adjusted,  and 
the  drawee,  a  member,  was  called  on  by  the  clearing  house  to  pay 
to  it  the  amount  of  the  draft,  this  was  hot  payment  of  the  draft.  It 
was  also  singularly  held  that  the  owner  could  maintain  an  action 
against  the  drawee  for  the  amount.  Crane  v.  Fourth  St.  Nat.  Bank, 
173  Pa.  566,  34  Atl.  296. 

The  failure  of  a  bank  paying  a  check  drawn  by  a  depositor  ih 
favor  of  a  third  person,  who  forwards  it  through  another  bank  for 
collection,  to  offer  to  return  the  check  to  the  collecting  bank  and 
to  demand  repayment,  within  the  time  required  by  the  rules  of  the 
clearing  house,  does  not  impair  its  right  to  recover  the  amount  from 
the  third  person,  provided  its  right  to  recover  is  otherwise  perfect. 
National  Exchange  Bank  v.  Ginn  &  Co.,  114  Md.  181,  78  Atl.  1026, 
33  L.  R.  A.  (N.  S.)  963.  Sec  "Banks  and  Banlcing,"  Dec.  Dig.  {Key 
No.)  §§  319,  321;  Cent.  Dig.  §§  1225,  1227. 

2'>  Merchants'  Nat.  Bank  v.  National  Bank,  139  Mass.  513,  2  N. 
E.  89.  See,  also,  :Manufacturers'  Nat.  Bank  v.  Thompson,  129  Mass. 
438,  37  Am.  Rep.  376 ;  National  Exch.  Bank  v.  Eliot  National  Bank, 
132  Mass.  147;  Louisiana  Ice  Co.  v.  State  Nat.  Bank  of  New  Or- 
leans, 1  McGloin  (La.)  181 ;  Overman  v.  Hoboken  City  Bank,  30  N.  J. 
Law,  61;  Id.,  31  N.  J.  Law,  563.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §§  319,  321;  Gent.  Dig.  §§  1225,  1227. 

21  Mt.  Morris  Bank  v.  Twenty -Third  Ward  Bank,  60  App.  Div.  20^, 
70  N.  Y.  Supp.  78 ;  Id.,  172  N.  Y.  244,  64  N.  E.  810.  See  Stuyvesant 
Bank  v.  National  :Mechanics'  Bank,  7  Lans.  (N,  Y.)  197. 

The  duty  of  a  clearing  house  agent  being  only  to  collect  through 
the  clearing  house,  such  agent  is  not  negligent  in  failing  to  present 
a  check  at  the  counter  of  the  drawee.  Farmers'  &  ^Mechanics'  Bank 
of  East  Birmingham  v.  Third  Nat.  Bank,  165  Pa.  500,  30  Atl.  1008. 
See  "Banks  and  Banking."  Dec.  Dig.  (Key  No.)  §§  319,  321;  Cent. 
Dig.  §§  1225,  1227. 


186  CLEARING  HOUSES  (Ch.  5 

iting  money  and  bills  receivable  as  collateral  security,  and  a 
rule  of  the  clearing  house  provided  that  such  arrangements 
should  not  be  discontinued  without ,  previous  notice,  which 
should  not  take  effect  until  the  completion  of  the  clearings  on 
the  day  after  its  receipt,  it  was  held  that  the  agreement  was  in 
effect  a  tripartite  one  between  the  two  banks  and  the  associa- 
tion, whereby  not  only  the  clearing  house  was  secured  as  to 
its  payments  by  the  deposit,^  but  the  other  members  of  the 
association  were  assured  that  all  checks  presented  would  be 
paid  up  to  and  including  the  day  following  the  giving  of  such 
notice,  and  that  the  clearing  member  was  required  to  pay  checks 
on  the  non-member  presented  on  the  day  after  such  notice,  al- 
though it  then  knew  that  the  non-member  was  insolvent ;  the 
security  being  applicable  to  the  amount  of  the  checks  so  paid.-^ 

2  2  O'Brien  v.  Grant,  146  N.  T.  163,  40  N.  E.  871,  28  L.  R.  A.  361. 

Where  a  similar  contract  existed  between  a  member  and  a  non- 
member  banli,  and  depositors  of  the  non-member,  learning  of  its  in- 
solvency, drew  cbecks  on  it,  which  were  presented  through  the  clear- 
ing house  and  paid  by  the  member  with  knowledge  that  the  super- 
intendent of  banks  had  taken  possession  of  the  non-member  the  day 
before,  the  member  was  nevertheless  entitled  to  bills  receivable  de- 
posited as  security  to  reimburse  itself  for  the  checks  paid.  Daven- 
port V.  National  Bank  of  Commerce.  127  App.  Div.  391,  112  N.  T. 
Supp.  291,  affirmed  194  N.  Y.  5GS,  88  N.  E.  1117. 

Where  a  member  bank,  which  had  contracted  with  a  non-mem- 
ber to  pay  checks  drawn  on  the  latter,  and  was  secured  by  a  deposit 
of  collateral  security,  paid  such  a  check  presented  through  the  clear- 
ing house,  and  the  next  day  the  drawee  was  declared  insolvent,  the 
former  did  not  stand  in  the  shoes  of  the  drawee,  so  as  to  be  entitled 
to  demand  from  the  drawer  only  the  difference  between  his  deposit 
in  the  drawee  bank  and  the  amount  paid,  but  had  the  rights  of  a 
holder  of  the  check,  and  was  entitled  (the  security  having  been  ex- 
hausted) to  recover  from  the  drawer  the  full  amount  paid.  Grant  v. 
^lacNutt,  12  Misc.  Rep.  20,  33  N.  Y.  Supp.  62. 

A  bank  which,  in  payment  of  a  clearing  house  check  drawn  in  its 
favor  as  a  result  of  the  day's  clearings,  received  the  proceeds  of 
checks  presented  to  another  member  on  the  next  morning  before  sus- 
pending payment,  must  account  to  the  bankrupt  estate  of  the  default- 
ing member.  Rector  v.  City  Deposit  Bank  Co.,  200  U.  S.  405,  20  Sup. 
Ct.  289,  .TO  L.  Ed.  527.     See,  also.  Rector  v.  Commercial  Nat.  Bank, 


§  49)  CLEARING    HOUSE   CERTIFICATES  187 


CLEARING  HOUSE  CERTIFICATES 

49.  ,When  the  rules  of  an  association  so  provide,  it  may  is- 
sue to  its  members  clearing  house  certificates,  se- 
cured by  a  deposit  of  money  or  other  assets  by  the 
bank  to  whom  the  certificates  may  be  issued,  to  be 
used  in  lieu  of  money  in  payments  between  the 
members. 

Frequently  the  rules  of  an  association  provide  for  the  use 
of  clearing-  house  certificates  in  payments  between  members ; 
the  certificates  being-  issued  to  members  audi  being  secured  by  a 
deposit  of  money  or  bills  receivable  or  other  assets  of  the  bank 
to  which  they  are  issued.^^  The  certificates  are  payable  on  de- 
mand, and  made  in  convenient  denominations  for  their  use  in 
payment.  Such  certificates  are  more  commonly  issued  in  times 
of  panic  or  stringency,  in  order  to  create,  to  the  extent  of  the 
certificates,  solidarity  of  responsibility  between  the  banks,  each 
of  which  is  liable  in  case  of  default  in  their  payment,  thus 
fortifying  the  credit  of  one  by  the  credit  of  all ;  while  the  certif- 
icates also  afford  a  means  by  which  a  bank  with  assets  which 
are  good,  but  which  at  such  a  time  are  not  readily  convertible 
into  money,  can  use  them  in  order  to  obtain  what  for  banking 
purposes  is  the  equivalent  of  cash.^*  It  has  been  held  that 
the  pledge  of  securities  for  this  purpose  is  not  in  violation  of 

200  U.  S.  420,  26  Sup.  Ct.  294,  50  L.  Etl.  533;  Yardley  v.  Philler,  167 
U.  S.  344,  17  Sup.  Ct.  835,  42  L.  Ed.  192. 

Such  payments  are  not  within  the  prohibition  of  an  act  against 
payment  by  insolvent  corporations  made  with  intent  to  prefer  cred- 
itors. O'Brien  v.  Grant,  suprn.  See  "Banks  and  Banking,"  Deo.  Dig. 
{Key  No.)  §§  319,  321;  Cent.  Dig.  §§  1225,  1221. 

2  3  Philler  v.  Patterson,  lOS  Pa.  468,  32  Atl.  26,  47  Am.  St.  Rep. 
896.  See  "Banks  and  Banking,"  Dec:  Dig.  (Key  No.)  §§  320.  322; 
Cent.  Dig.  §§  1226,  1228. 

2  4  Yardley  v.  Philler,  107  U.  S.  344,  17  Sup.  Ct.  8.35,  42  L.  Ed.  192. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  320,  322;  Cent. 
Dig.  §§  1226,  1228. 


1S8  '  CLEARIXG   HOUSES  (Cll.  5 

the  laws  relating  to  national  banks.- ^  When  bills  or  notes  are 
so  deposited  with  an  association  or  its  committee,  it  becomes 
a  holder  for  value,  and  is  not  affected  by  equities  existing  be- 
tween the  original  parties  of  which  it  has  not  notice.-® 

25  Philler  v.  Patterson,  168  Pa.  46S.  32  Atl.  26,  47  Am.  St.  Rep.  896. 

For  the  purpo.se  of  reserve,  clearing  house  certificates,  represent- 
ing specie  or  lawful  money  deposited  for  that  purpose,  are  recog- 
nized by  the  national  banking  laws.  Rev.  St.  U.  S.  §  5192  (U.  S. 
Comp.  St.  1901,  p.  3487). 

A  preference  was  not  created,  within  a  statute  inhibiting  assign- 
ments and  contracts  by  a  bank  in  contemplation  of  insolvency  ex- 
cept for  the  benefit  of  all  creditors  and  stockholders,  where  a  bank 
accepted  clearing  house  certificates,  gave  its  notes  for  their  amounts, 
and  deposited  collaterals  as  security.  Booth  v.  Atlanta  Clearing 
House  Assn,  132  Ga.  100,  63  S.  E.  907.  See  "Banks  and  Banking,'' 
Dec.  Dig.  {Key  lYo.)  §  322;  Cent.  Dig.  §  1228. 

2  6  Philler  v.  Patterson,  168  Pa.  4G8,  32  Atl.  26,  47  Am.  St.  Rep.  896. 

A  note  so  deposited  is  not,  in  the  hands  of  the  committee,  sub- 
ject to  set-ofC  by  the  maker  of  any  sum  due  him  from  the  bank. 
Philler  v.  Jewett,  166  Pa.  456,  31  Atl.  204.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  J^o.)  §§  320,  322;  Cent  I  Dig.  §§  1226,  1228. 


§  50)  COLLECTIONS  189 


CHAPTER  VI 

COLLECTIONS  -^ 

50.  Relation  Between  Depositor  for  Collection  and  Bank. 

51.  Duties  of  Bank  in  Making  Collection. 

52.  Rights  and  Liabilities  as  to  Proceeds  of  Collection — Relation  of 

Bank  to  Customer. 

53.  Insolvencj'  of  Bank. 

54.  Bank's  Lien. 

55.  Collection  bj-  Correspondent  Bank — Relation  Between  Depositor 

and  Depositary  and  Collecting  Banks. 

56.  Set-Olf  of  Collecting  Bank  Against  Forwarding  Bank. 

57.  Lien  of  Collecting  Bank. 

RELATION  BETWEEN  DEPOSITOR  FOR  COLLEC- 
TION AND  BANK 

50.  Where  a  paper  is  deposited  with  a  bank  for  collection, 
the  relation  between  the  depositor  and  the  bank  is 
that  of  principal  and  agent  until  collection;  but 
when  the  collection  has  been  made,  unless  it  be 
otherwise  agreed,  by  weight  of  authority,  the  bank 
becomes  a  debtor  to  the  depositor  for  the  amount 
collected. 

In  General 

Although  the  business  of  collecting  commercial  paper  is 
not  confined  to  banks,  the  transaction,  when  the  collection  is 
by  a  bank,  usually  involves  the  crediting  of  the  proceeds  of  the 
collection  to  the  deposit  account  of  the  customer,  so  that  col- 
lecting is  closely  connected  with  the  business  of  banking  and 
is  engaged  in  by  all  commercial  banks.  The  power  to  collect 
commercial  paper  is  implied  under  a  charter  to  do  a  general 
banking  business.^ 

1  Branch  Bank  of  State  at  Montgomery  v.  Knox,  1  Ala.  148 ;  First 
Nat.  Bank  v.  First  Nat.  Bank  of  Newport,  11 G  Ala.  520,  22  South. 
976 ;    Keyes  v.  Bank  of  Hardin,  52  Mo.  App.  .323. 

Collecting  commercial  paper  is  part  of  the  regular  business  of  a 


190  COLLECTIONS  (Ch.  6 

The  transaction  is  presented  in  its  simplest  form  when  the 
depositary  bank  is  situated  in  the  same  place  where  the  paper 
is  to  be  presented  for  payment  and  collected.  The  transaction 
is  more  complicated  when  the  paper  is  to  be  presented  at  anoth- 
er place,  since  then  the  depositary  bank  must  forward  the  paper 
to  an  agent,  usually  another  bank,  for  collection  at  that  place, 
and  it  becomes  necessary  to  consider,  not  merely  the  relation 
of  the  customer  with  the  depositary  bank,  but  also  his  rela- 
tion with  the  collecting  bank,  and  its  relation  with  the  forward- 
ing or  depositary  bank.  The  measure  of  the  responsibility  of 
the  depositary  bank  in  such  cases,  as  will  appear,  differs  in  dif- 
ferent jurisdictions.^  Often,  moreover,  the  depositary  bank, 
not  having  a  correspondent  at  the  place  of  presentment,  sends 
the  paper  to  a  correspondent  elsewhere,  which  in  turn  sends 
the  paper  to  a  correspondent  of  its  own  at  the  place  of  present- 
ment, or  if  it  has  no  correspondent  there  sends  the  paper  to 
still  another  bank,  which  has  a  correspondent*  at  the  place  of 
collection.^  So  far  as  concerns  the  duties  of  the  collecting 
bank,  however,  in  the  mere'  matter  of  making  the  collection, 
the  same  considerations  apply,  whether  it  be  the  depositary 
bank,  or  a  bank  to  which  the  paper  has  been  forwarded  by  that 
bank,  or  an  intervening  bank  for  collection. 
Relation  Between^Bank  and  Depositor  for  Collection 

As  already  explained,  the-  relation  between  the  holder  of 
paper  who  deposits  it  with  a  bank  for  collection  and  the  bank  is 
that  of  principal  and  agent.'*  And  this  is  true,  whether  by  the 
form  of  his  indorsement,  as  an  indorsement  "for  collection," 
the  depositor  simply  constitutes  the  bank  his  agent  for  that  pur- 
pose,^ or  whether,  although  the  indorsement  by  its  form  invests 
the  bank  with  the  title  to  the  paper,  an  agency  or  trust  is  oth- 
erwise created  by  the  understanding  of  the  parties.®  In  either 

national  bank.  Mound  City  P.  &  O.  Co.  v.  Commercial  Nat.  Banii, 
4  UtaB,  353,  9  Pac.  709.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  157;   Cent.  Dig.  §§  539,  540,  51,5,  546. 

2  Post,  p.  204.  '  ■*  Ante,  p.  28.  «  Ante,  p.  31. 

3  Post,  p.  219.  5  Ante,  p.  29. 


§  50)  RELATION    BETWEEN    DEPOSITOR    AND   BANK  191 

case,  subject  to  the  bank's  lien,^  if  any,  and  subject  to  the 
rights  of  holders  in  due  course  if  the  paper  was  unrestrictive- 
ly  indorsed,^  the  depositor  can  terminate  the  agency  and  with- 
draw the  paper  from  the  bank  at  any  time  before  collection 
has  been  made."  When  the  collection  has  once  been  made, 
however,  unless  it  be  otherwise  agreed,  the  relation  changes, 
and  the  bank  becomes  the  debtor  of  the  customer  for  the  pro- 
ceeds.^*' 
Note  Payable  at  Bank 

The  fact  that  a  note  is  made  payable  at  a  particular  bank 
does  not,  of  course,  constitute  the  bank  the  holder's  agent  to 
collect  it.^^  If  the  maker  deposits  money  in  the  bank  to  be 
applied  in  payment,  the  note  not  having  been  left  in  the  bank 
for  collection,  the  bank  receives  the  money  as  agent  of  the 
debtor,  and  the  deposit  does  not  constitute  payment.^^  But  if 
the  holder  deposits  the  note  in  the  bank  for  collection,  the  bank 
becomes  his  agent  to  receive  payment. ^^  It  follows  that  if  the 
maker  deposits  money  for  payment  of  the  note,  and  the  holder 

7  Post  p.  210.  8  Ante,  p.  32.  8  Ante,  pp.  .30,  33. 

10  Ante,  p.  31 ;    post,  p.  205. 

11  Ward  V.  Smith.  7  Wall.  447,  19  L.  Ed.  207;  Bloomer  v.  Dau,  122 
Mich.  522,  81  N.  AV.  331.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
2\^o.)  §  158;   Cent.  Dig.  §§  5.'i2-5It6. 

12  Bloomer  v.  Dau,  122  Mich.  522,  81  N.  W.  331;  St.  Paul  Nat. 
Bank  v.  Cannon,  46  Minn.  95,  48  N.  W.  526,  24  Am.  St.  Rep.  189; 
Adams  v.  Hackensack  Imp.  Commission,  44  N.  J.  Law,  638,  43  Am. 
Rep.  406. 

Though  the  note  is  in  the  manual  possession  of  the  bank,  if  it 
has  not  been  deposited  for  collection  the  bank  is  not  the  agent  of 
the  holder  to  receive  payment,  and  money  deposited  by  the  payor  to 
meet  the  note  does  not  constitute  payment,  but  remains  his  own 
property.  Cheney  v.  Libby,  134  U.  S.  68,  10  Sup.  Ct.  498,  33  L.  Ed. 
818.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  156;  Cent. 
Dig.  §§  539-5ji6. 

13  Ward  V.  Smith,  7  Wall.  447,  19  L.  Ed.  207;  Smith  v.  Essex 
County  Bank,  22  Barb.  (N.  Y.)  627;  Blakeslee  v.  Hewitt,  76  Wis. 
341,  44  N.  W.  1105.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  A'o.)  § 
156;    Cent.  Dig.   §§  539-546. 


19^  COLLECTIONS  (Ch.  6 

afterwards  deposits  the  note  for  collection,  the  transaction 
operates  as  payment  when  the  bank  applies  the  money  to  pay- 
ment of  the  note.^* 


DUTIES  OF  BANK  IN  MAKING  COLLECTION 

51.  When  the  paper  must  be  collected  at  a  different  place 
from  that  in  which  the  depositary  bank  is  situated, 
it  is  its  duty  to  forward  the  paper  to  a  bank  or 
^  other  agent  at  the  place  of  presentment  to  make 

the  collection.  It  is  the  duty  of  the  collecting  bank, 
whether  it  be  the  depositary  bank  or  another,  to 
exercise  reasonable  diligence  and  care  in  obtain- 
ing payment  of  the  paper,  and  in  securing  the 
rights  of  the  owner  against  any  drawer  or  indorser 
who  may  be  secondarily  liable  thereon  by  duly 
causing  presentment  to  be  made,  notice  of  dishonor 
to  be  given,  and  protest  to  be  made,  as  well  as  to 
follow  the  instructions  of  its  principal  and  to  ex- 
ercise good  faith.  For  any  loss  resulting  to  its 
principal  from  its  failure  to  perform  such  duty  the 
bank  is  liable. 

In  General 

In  general,  it  is  the  duty  of  an  agent  to  exercise  in  the  per- 
formance of  his  agency  such  reasonable  skill,  care,  and  dili- 
gence as  the  nature  of  his  undertaking  demands.  A  bank  in- 
trusted with  the  actual  collection  of  commercial  paper,  wheth- 
er it  be  the  depositary  bank  or  a  bank  at  the  place  of  collection, 


1*  If  the  money  and  the  note  are  received  before  maturity,  and  the 
bank  fails  after  maturity  without  having  applied  the  money,  the 
loss  falls  on  the  maker.  Sutherland  v.  First  Nat.  Bank  of  Ypsilanti, 
31  Mich.  230.  See  "Banks  and  Banlcing,"  Dec.  Dig.  {Key  :Vo.)'§  166; 
Cent.  Dig.  §§  ol},-518,  586. 


§  51)  DDTIKS    OF    HANK    IN    MAKING    COLLECTION  193 

to  which  tlie  i)a])er  has  been  forwarded  for  that  purpose  by  the 
depositary  bank,  must  take  all  renuisite  steps  to  obtain  payment 
and  to  secure  and  preserve  the  rights  of  its  custorti^r  against 
the  various  parties  to  the  instrument,  and  it  must  therefore 
make  due  presentment  for  acceptance  and  for  payment,  as  the 
case  may  be,  and  if  acceptance  or  payment  be  refused  it  must 
cause  due  notice  of  dishonor  to  be  given  to  the  drawer  and 
indorsers.  if  any,  and  the  instrument  to  be  protested  if  it  be 
one  requiring  protest.^ ^  For  any  loss  resulting  to  the  custom- 
er from  its  failure  to  perform  these  duties  the  bank  is  liable. 
Ordinary  care  and  reasonable  diligence  is  the  general  measure 
of  responsibility.  If,  owing  to  the  lack  of  clear  judicial  prec- 
edent or  of  any  uniform  practice,  the  proper  course  to  be  pur- 
sued is  uncertain,  the  bank  is  protected  if  it  acts  prudently  and 
exercises  reasonable  knowledge  and  skill. ^^ 

While  banks  sometimes  make  a  charge  for  collection,  ordi- 
narily tl^e  business  is  undertaken  without  charge ;  the  induce- 
ment or  consideration  to  the  bank  being  the  deposits  which 
may  result  from  the  collection  and  the  advantages  to  be  de- 
rived from  the  business  connection.  In  such  cases  the  agency 
is  not  to  be  regarded  as  gratuitous,  or  at  any  rate  the  bank's 

15  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  27(i.  5  Sup. 
Ct.  141,  '28  L.  Ed.  722;  Ft.  Dearborn  Nat.  Bank  v.  Security  Bank, 
87  Minn.  81.  91  N.  W.  257;  Capitol  State  Bank  v.  Lane,  52  Miss. 
077 ;  Montgomery  County  Bank  v.  Albany  City  Bank,  7  N.  Y.  459 ; 
Kirkham  v.  Bank  of  America,  165  N.  Y.  132,  58  N.  E.  753,  80  Am.  St. 
Rep.  714;  Mound  City  Paint  Co.  v.  Commercial  Nat.  Baii^.  4  Utah, 
353,  9  Pac.  709. 

It  is  not  the  bank's  duty,  without  instructions,  to  bring  suit  where 
payment  is  refused.  Crow  v.  Mechanics'  &  Traders'  Bank.  12  La. 
Ann.  692;  Freeman  v.  Citizens'  Nat.  Bank,  78  Iowa,  150,  42  N.  W. 
032.  4  L.  R.  A.  422.  Sec  ''Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§§  157,  171,  172;   Cent.  Dig.  §§  539-51)6,  597-G2S. 

10  Mechanics'  Bank  at  Baltimore  v.  Merchants'  Bank  at  Boston, 
6  Mete.  (Mass.)  13 ;  Morris  v.  Union  Nat.  Bank,  13  S.  D.  329,  83  N. 
W.  2.^2,  50  L.  R.  A.  182.  See,  also.  Haddock  v.  Citizens'  Nat.  Bank, 
53  Iowa,  542,  5  N.  W.  766.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  171;  C'cnt.  Dig.  §§  597-618. 
TIFF.BKS.&  B.— 13 


194  COLLECTIONS  (Ch.  G 

responsibility  is  not  afifected  by  the  fact  that  no  direct  com- 
pensation is  received/' 

Presentment 

It  is  the  duty  of  a  collecting  bank  to  make  due  presentment 
for  acceptance  or  for  payment,  as  the  case  may  be,  of  paper  in- 
trusted to  it  for  collection.  Presentment  for  payment,  and  in 
certain  cases  presentment  for  acceptance,  unless  waived  or  oth- 
erwise excused,^'  are  requisite,  in  order  to  preserve  the  rights 
of  the  holder  against  parties  secondarily  liable ;  and'  if  by  fail- 
^ure  to  make  due  presentment  the  holder  suffers  loss,  by  the  con- 
sequent discharge  of  a  drawer  or  indorser  or  otherwise,  the 
bank  is  liable  therefor.^"  A  discussion  of  the  rules  of  law 
governing  the  presentment  of  bills  of  exchange  and  promissory 
notes  for  acceptance  and  for  payment  is  beyond  the  scope  of 
this  book,  and  the  reader  is  referred  to  the  works  upon  nego- 
tiable instruments  and  to  the  provisions  of  the  Negotiable  In- 
struments Law,-°  which  is  now  in  force  in  most  jurisdictions. 

1-  See  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  27G.  ."» 
Sup.  Ct.  141,  28  L.  Ed.  722;  Bailie  v.  Augusta  Sav.  Bank,  95  Ga.  277. 
21  S.  E.  717,  51  Am.  St.  Rep.  74 ;  Titus  v.  Mechanics'  Nat.  Bank  at 
Treuton.  35  N.  J.  Law,  588;  Kershaw  v.  Ladd.  34  Or.  375,  56  Pac. 
402,  44  L.  R.  A.  236.  ;Sfee  ''Banks  and  Banking,'"  Dec.  Dig.  {Key  'So.) 
§S  loCu  111;    Cenjt.  Dig.  §§  o39-5J^G,  597-618. 

IS  See  Negotiable  Instruments  Law,  §§  79-82,  148. 

19  Bank  of  Washington  v.  Triplett,  1  Pet.  25,  7  L.  Ed.  37;  Jeffer- 
son County  Savings  Bank  v.  Hendrix,  147  Ala.  670,  39  South.  295,  1 
L.  R.  A.  (N.  S.)  246;  Tyson  v.  State  Bank  of  Indiana.  6  Blackf. 
(Ind.)  225,  -38  Am.  Dec.  139 ;  McKiuster  v.  Bank  of  Utica,  9  Wend. 
(N.  Y.)  46;  First  Nat.  Bank  v.  Moore,  6  Ohio  Dec.  779;  Bank  of 
Delaware  County  v.  Broomhall,  38  Pa.  135,  80  Am.  Dec.  471.  See  cas- 
es cited  supra,  note  15.  If  the  paper  woiild  not  have  been  paid  if 
presented  promptly,  and  there  are  no  persons  secondarily  liable  who 
are  discharged  by  the  delay,  the  bank  is  not  liable.  Grouse  v.  First 
Nat.  Bank  of  Penn  Yau,  137  N.  Y.  383,  33  N.  E.  301.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §§  111,  172;  Cent.  Dig.  §§  597- 
628. 

'  2  0  See  sections  70-88  (for  payment);    sections  14.3-151  (for  accept- 
ance). 


§  51)  DUTIKS    OF    BANK    IN    MAKING    COLLECTION  195 

It  is  to  be  oljservcd,  however,  that  a  coHecting  bank  may 
fait  short  of  the  measure  of  dihgence  which  it  owes  to  its  cus- 
tomer, notwithstanding  that  it  observes  the  full  degT*et  of  dili- 
gence which  is  sufificient  to  enable  the  holder  of  a  bill  or  a  note 
to  charge  a  drawer  and  the  indorsers.  For  example,  the  draw*- 
er  of  a  sight  draft  would  ordinarily  be  charged  if  it  were  pre- 
sented by  a  collecting  bank  the  day  after  its  receipt ;  -^  but  if 
the  bank  had  information  that  the  drawer  was  in  failing  cir- 
cumstances, and  that  the  draft  would  not  be  paid  unless  pre- 
sented at  once,  it  would  be  the  duty  of  the  bank  to  present  it, 
if  possible,  on  the  day  of  its  receipt.^-  Again,  while  it  is  not 
necessary,  in  order  to  charge  the  drawer  of  a  bill  payable  at 
a  day  certain,  to  present  it  for  acceptance,  and  he  is  chargeable, 
provided  it  be  presented  for  payment  on  the  day  it  falls  due,  it 
is  nevertheless  for  the  interest  of  the  holder  to  have  it  present- 
ed for  acceptance,  so  that  he  may  have  the  assurance  that  the 
drawee  will  pay  it,  and  otherwise  have  immediate  recourse  to 
the  drawer,  and  consequently  it  is  held  that  it  is  the  duty  of  a 
collecting  bank  to  present  such  a  bill  for  acceptance,  and  that 
the  bank  is  chargeable  with  negligence  if  it  fails  to  do  so.^^  , 

Sending  Paper  to  Drawee  or  Debtor 

In  some  cases  it  has  been  held  that  a  bank  makes  due  pre- 
sentment where  it  mails  paper  intrusted  to  it  for  collection 
directly  to  a  bank  on  which  it  is  drawn  or  by  which  it  is  pay- 
able.^*   This  is  usually  justified  on  the  ground  of  usage.     By 

\ 

21  Citizens'  Nat.  Banlv  of  Lawrenceburg  v.  Third  Nat.  Bank,  19 
Ind.  App.  69,  49  N.  E.  171.  See  "  Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §§  171,  172;    Cent.  Dig.  §§  597-628. 

2  2  See  First  Nat.  Banlc  of  Meadville,  Pa.,  v.  Fourtli  Nat.  Baulc  of 
New  Yorli,  77  N.  Y.  320,  33  Am.  Rep.  618;  Pinlmey  v.  Kauawlia 
Valley  Bank,  6S  W.  Va.  254,  69  S.  E.  1012,  32  L.  R.  A.  (N.  S.)  987. 
-See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §§  171,  172;  Cent.  Dig. 
§§  597-628. 

2  3  See  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  276,  5 
Sup.  Ct.  141,  28  L.  Ed.  722.  See  -Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §§  171,  172;    Cent.  Dig.  §§  597-628. 

2  4  Ante,  p.  113. 


196  COLLECTIONS  (Cll.  6 

the  better  rule,  however,  the  bank  does  not>  perform  its  duty 
where  it  attempts  to  collect  in  this  way,  and  is  responsible  for 
any  loss  resulting  thereby,-^  unless  it  appears  that  the  holder 
has  assented  to  this  procedure  being  followed.-^ 

Xoticc  of  Dishonor 

Where  a  negotiable  instrument  has  been  dishonored,  either 
by  nonacceptance  or  by  nonpayment,  notice  of  dishonor  must 
be  given,  as  a  rule,  to  the  drawer  and  to  each  indorser,  and 
any  drawer  or  indorser  to  whom  such  notice  is  not  given  is 
discharged.-"  For  any  negligence  in  failing  to  give  notice  of 
dishonor  the  collecting  bank  is  answerable.-® 

2  5  First  Nat.  Bank  v.  Fourth  Nat.  Bank,  56  Fed.  967,  6  C.  C.  A. 
183;  Farley  Nat.  Bank  v.  Pollock,  145  Ala.  321,  39  South.  612.  2 
L.  R.  A.  (N.  S.)  194,  117  Am.  St.  Rep.  44  (custom  so  authorlzi. 
void);  German  Nat.  Bank  v.  Burns,  12  Colo.  539,  21  Pac.  714,  W, 
Am.  St.  Rep.  247 ;  Drovers'  Nat.  Bank  v.  Anglo-American  Packing 
&  Prov.  Co.,  117  111.  100,  7  N.  E.  601,  57  Am.  Rep.  855 ;  Minneapolis 
Sash  &  D.  Co.  V.  Metropolitan  Bank,  76  Minn.  136,  78  N.  W.  980,  44 
L.  R.  A.  504,  77  Am.  St.  Rep.  609  (notwithstanding  usage) ;  Bank  of 
Rocky  Mount  v.  Floyd,  142  N.  C.  187,  55  S.  E.  95 ;  Merchants"  Nat. 
Bank  v.  Goodman,  109  Pa.  422,  2  Atl.  687,  58  Am.  Rep.  728 ;  Wagner 
V.  Crook,  167  Pa.  259,  31  Atl.  576,  46  Am.  St.  Rep.  672;  Givan  v. 
Bank  of  Alexandria  (Tenn.)  52  S.  W.  923;  Winchester  Milling  Co. 
V.  Bank  of  Winchester,  120  Tenn.  225,  111  S.  W.  ^S,  18  L.  R.  A.  (N. 
S.)  441 ;  First  Nat.  Bank  v.  City  Nat.  Bank  (Tex.  Civ.  App.)  34  S.  W\ 
458;  Pinkney  V.  Kanawha  Valley  Bank,  68  W.  Va.  254,  69  S.  E.  1012, 
32  L.  R.  A.  (N.  S.)  987.  But  see  Indig  v.  National  City  Bank  of 
Brooklyn,  80  N.  Y.  100.  See  "Banks  and  Bankinf/,"''  Dec.  Dig.  (Key 
A'o.)  §§  163,  111,  172;   Cent.  Dig.  §§  567-570,  597-62S.       \ 

26  First  Nat.  Bank  v.  Bank  of  Whittier,  221  III.  319,  77  N.  E.  563; 
First  Nat.  Bank  of  Chicago  v.  Citizens"  Sav.  Bank,  123  Mich.  336,  82  N. 
W.  66,  48  L.  R.  A.  583.  See  "Banks  and  Banking,"  Dec.  Dig.  (Keg 
Xo.)  §§  171,  172;    Cent.  Dig.  §§  597-628. 

2  7  Negotiable  In.struments  Law,  §  89. 

2  8  Bird  v.  Louisiana  State  Bank,  93  U.  S.  96,  23  L.  Ed.  818;  Ex- 
change Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  276,  5  Sup.  Ct.  141, 
28  L.  Ed.  722;  Bank  of  Mobile  v.  Iluggins,  3  Ala.  206;  Chapman  v. 
McCrea,  63  Ind.  360;  Exchange  Bank  of  Wheeling  v.  Sutton  Bank, 
78  Md.  577,  28  Atl.  563,  23  L.  R.  A.  173 ;  Borup  v.  Nininger,  5  Minn. 
523  (Gil.  417) ;    West  v.  St.  Paul  Nat.  Bank,  54  Minn.  466,  56  N.  W. 


§  Olj  DUTIES   OF    HANK    IN    MAKING    COLLECTION  197 

Where  the  instrument  has  been  dishonored  in  the  hands  of 
an  agent,  he  may  either  himself  give  notice  to  the  parties  Hable 
thereon,  or  he  may  give  notice  to  his  principal,  a*t<+  the  prin- 
cipal may  then  give  notice  to  the  parties  liable  thereon.-"  It 
follows  that  if  the  bank,  as  agent  for  collection  of  the  holder, 
gives  notice  to  its  customer  or  principal,  and  the  principal  him- 
self gives  notice  to  the  parties  secondarily  liable,  the  rights  of 
the  principal  have  been  preserved.  In  some  cases  it  has  been 
held  or  intimated  that  it  is  the  duty  of  the  bank  to  cause  notice 
to  be  given  to  all  parties  who  may  be  secondarily  liable ;  ^" 
but  by  weight  of  authority  this  is  not  necessary,  and  the  bank 
discharges  its  duty  sufificiently  by  causing  notice  of  dishonor 
to  be  given  to  the  principal,  leaving  him  to  give  notice  to  the 
drawer  and  indorsers.^^ 

In  giving  notice,  the  bank  must  conform  to  the  requirements 
of  the  law  merchant  in  respect  to  the  form,  time,  and  manner 
of  giving  the  notice.  Notice  of  dishonor  may,  however,  be 
waived,  and  in  certain  cases  is  dispensed  with,  and  jn  some 
cases  delay  in  giving  notice  is  excused;  ^^  and  the  rules  which 
in  such  cases  operate  for  the  benefit  of  the  holder  would,  of 

54 ;    Walker  v.  Bank,  9  N.  Y.  oS2 ;    Bank  of  New  Hanover  v.  Kenan. 
7G  N.   C.  B40;    City  Nat.  Bank  of  Dayton  v.   Clinton   County   Nat. 
Bank  of  Wilmington,  49  Ohio  St.  3.^1,  30  N.  E.  958.    See  "Banks  and 
Bankitifj:'  Dec.  Dig.  (Key  No.)  §§  171,  112;   Cent.  Dig.  §§  597-628. 
-9  Negotiable  Instruments  Law,  §  94. 

30  See  Fabens  v.  Mercantile  Bank.  23  Pick.  (Mass.)  330',  34  Am. 
Dec.  59 ;  Jagger  v.  National  Germa'n-Am.  Bank,  53  Minn.  3S6,  55  N.  W. 
545 ;  President,  etc.,  of  Bank  of  Utica  v.  Smedes,  3  Cow.  (N.  Y.)  062 ; 
West  Branch  Bank  v.  Fulmer,  3  Pa.  399,  45  Am.  Dec.  051.  See 
"Banks  and  Banking;'  Dec.  Dig.  (Key  Xo.)  §§  171,  172;  Cent.  Dig. 
§§   J9  7-626'. 

31  United  States  Bank  v.  Goddard,  Fed.  Cas.  No.  917,  5  Mason, 
300 ;  Codrington  v.  Adams,  Fed.  Cas.  No.  2,937 ;  Phipps  v.  President, 
etc.,  of  Millbury  Bank,  8  Mete.  (Mass.)  79;  Wood  River  Bank  v. 
First  Nat.  Bank,  36  Neb.  744.  55  N.  W.  239 ;  State  Bank  of  Troy 
V.  Bank  of  the  Capitol.  41  Barb.  (N.  Y.)  343.  See  "Banks  and 
Banking,-'  Dec.  Dig.  {Key  Xo.)  §§  171,  172;   Cent.  Dig.  §§  597-628. 

32  Negotiable  Instrun-ients  Law.  §§  109-115. 


1^98  COLLECTIONS  (Ch.  G 

course,  operate  also  for  the  benefit  of  the  bank.  A  discussion 
of  the  law  on  the  general  subject  of  notice  of  dishonor  is  be- 
yond the  scope  of  this  book.  It  is  formulated  in  the  Nego- 
tiable Instruments  Law.^^ 

Protest 

Where  a  foreign  bill  of  exchange  is  dishonored  by  nonac- 
ceptance  or  by  nonpayment,  as  the  case  may  be,  it  must  be  duly 
protested,  unless  protest  be  waived  ^*  or  dispensed  with,""  or 
else  the  drawer  or  indorsers  are  discharged.^"  In  case  of  such 
dishonor,  the  collecting  bank  is,  of  course,  charged  with  the 
dutv  of  taking  proper  steps  to  have  the  paper  protested,  and 
if  it  fails  to  do  so  it  will  be  liable  for  any  consequent  loss.=^' 

Liability  of  Collectin'g  Bank  for  Default  of  Notary 

Whether  a  collecting  bank  is  responsible  for  the  acts  and 
defaults  of  a  notary  employed  by  it  to  protest  paper  is  a  ques- 
tion on  which  the  cases  conflict.  In  jurisdictions  where  a  de- 
positary.  bank  is  responsible  only  for  due  care  in  selecting  at 
another  point  a  collecting  bank,  it  is  generally  held  that  a  bank 
is  responsible  only  for  due  care  in  selecting  a  notary.^  ^     On 


3  3  Negotiable  lustruiiieuts  Law,  §§  89-118. 

34  Negotiable  Instrumeuts  Law,  §  111. 

3  5  Negotiable  Tnstriiiuents  Law,  §  159. 

36  Negotiable  Instruuients  Law,  §§  118,  152. 

For  the  formalities  of  protest,  see  Negotiable  Instruuients  Law, 
§§  153-lGO. 

3  7  See  cases  cited  supra,  note  15.  / 

3  8  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13,  45  Am.  Dec.  72; 
Citizens'  Bank  v.  Howell,  8  Md.  530,  63  Am.  Dec.  714 ;  Warren  Bank 
V.  Suffolk  Bank,  10  Cush.  (Mass.)  582 ;  Bowling  v.  Arthur,  34  Miss. 
41 ;  Bellemire  v.  Bank  of  United  States,  4  Whart.  (Pa.)  105,  33  Am. 
Dec.  40;  Bank  of  Louisville  v.  First  Nat.  Bank  of  Knoxville,  8  Baxt. 
C^'enu.)  101,  35  Am.  Rep.  G91 ;  Stacy  v.  Dane  County  Bank,  12  Wis. 
029. 

An  exception  arises  where  the  notaj'y  is  a  bauk  officer.  Wood  Riv- 
er Bank  v.  First  Nat.  Bank,  30  Neb.  744,  55  N.  W.  239.  See,  also. 
Gerhart  v.  Boatmen's  Sav.  Inst.,  38  :Mo.  60,  90  Am.  Dec.  407  (notary 
in  employ  of  bauk  under  bond).     Contra:    First  Nat.  Bank  of  Man- 


§  51)  DUTIES    OF    BANK    IN    MAKING    COLLECTION  TJ!) 

the  other  hand,  in  jurisdictions  where  the  depositary  bank  is 
held  responsible  for  the  acts,  and  defaults  of  its  correspondent 
bank,  wiiile  it  is  held  by  some  of  the  courts  that  t1ie*same  re- 
sponsibility attaches  for  the  acts  of  a  notary/^''  other  courts 
distinguish  a  notary  from  a  collecting-  bank,  on  the  ground 
that  a  notary  is  a  public  officer,  and  conseciuently  hold  that  the 
bank  is  responsible  only  for  due  care  in  his  selection.*" 

Conflict  of  Laws 

Where  a  bill  or  a  note  is  drawn  or  indorsed  in  one  place, 
and  is  to  be  presented  for  payment  in  another,  the  formality  in 
respect  to  the  manner  of  presentment,*^  notice  of  dishonor,*^ 


ning  V.  German  Bank  of  Carroll  County,  107  Iowa,  543,  78  N.  W.  195, 
44  L.  R.  A.  133,  70  Am.  St.  Rep.  216  (even  if  notary  was  assistant 
cashier  of  bank).  And  see  May  v.  Jones,  88  Ga.  308,  14  S.  E.  552, 
15  L.  R.  A.  637,  30  Am.  St.  Rep.  154. 

Liability  of  depositary  bank  for  default- of  correspondent,  post,  p. 
212.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  171,  172; 
Cent.  Dig.  §§  597-628. 

3  9Davey  v.  Jones,  42  N.  J.  Law,  28,  36  Am.  Rep.  505;  Ayrault  v. 
Pacific  Bank,  47  N.  Y.  570,  7  Am.  Rep.  489;  Hitchcock  v.  Bank  of 
Suspension  Bridge.  57  App.  Div.  458,  68  N.  Y.  Supp.  234.  So  also  in 
Kansas.  Bank  of  Lindsborg  v.  Ober  &  Hageman,  31  Kan.  599,  3 
Pac.  324.  See  '^BanJ^s  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  171,  172; 
Cent.  Dig.  §§  597-628. 

4  0  Britton  v.  Niccolls,  104  U.  S.  757,  26  L.  Ed.  917  (distinguished 
in  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  276,  5  Sup.  Ct. 
141,  28  L.  Ed.  722) ;  First  Nat.  Bank  of  Gallipolis  v.  Butler,  41  Ohio 
St.  519,  52  Am.  Rep.  94 ;  Thompson  v.  Bank  of  State  of  South  Caro- 
lina, 3  Hill  (S.  C.)  77,  30  Am.  Dec.  354.  Sec  "Bunks  and  Banking," 
Dec.  Dig.  {Key  No.)  §§  171,  172;   Cent.  Dig.  §§  597-628. 

41  Rothschild  v.  Currie,  1  Q.  B.  43;  Pierce  v.  Insdeth,  106  U.  S. 
546,  1  Sup.  Ct.  418,  27  L.  Ed.  254;  Todd  v.  Neal's  Adm'r,  49  Ala. 
266;  McClane  v.  Fitch,  4  B.  Mon.  (Ky.)  600;  Snow  v.  Perkins,  2 
Mich.  238;  Ellis  v.  Bank,  7  How.  (Miss.)  294,  40  Am.  Dec.  63.  See 
-Bills  and  Notes,"  Dec.  Dig.  {Key  No.)  §  386;  Cent.  Dig.  §§  lOSl-lOo't.. 

4  2  Rothschild  V.  Currie,  1  Q.  B.  43;  Hirschfeld  v.  Smith,  L.  R.  I 
C.  P.  340;  Rouquette  v.  Overmami,  L.  R.  10  Q.  B.  525;  Todd  v, 
Neal's  Adm'r,  49  Ala.  266;  Wooley  v.  Lyon,  117  111.  244.-0  N.  E.  SS5, 
57  Am^  Rep.  867.     Contra:    Snow  v.  Perkins,  2  Mich.  238;    Aymar  v. 


200  COLLECTIONS  (Ch.  G 

and  protest  *^  is  in  general  governed  by  the  law  of  the  place 
of  payment,  and  not  of  the  place  where  the  instrument  was 
drawn  or  indorsed.  It  follows  that- a  bank  to  which  a  bill  or 
a  note  is  sent  for  collection  discharges  its  duty  if  it  conforms 
to  the  rules  of  the  local  law  in  these  respects,  unless  it  is  in- 
structed to  follow  a  different  course.** 

Instructions 

It  is  the  duty  of  the  bank  to  follow  any  instructions  which 
the  customer  may  give  in  respect  to  the  collection  or  remittance, 
and  if  the  bank  fails  so  to  do  it  will  be  liable  for  awy  resulting 
loss.*^  If  the  paper  is  forwarded  by  the  depositing  bank  to  an- 
other bank  for  collection,  it  is  the  duty  of  the  depositary  to 
communicate  the  instructions  to  the  collecting  bank.*^ 

Sheldon,  12  Wend.  (N.  Y.)  439,  27  Am.  Dec.  137 ;  Lee  v.  Selleck,  33 
X.  Y.  615  (but  see  Union  Nat.  Bank  v.  Chapman,  169  N.  Y.  53S,  62 
N.  E.  672,  57  L.  R.  A.  513,  88  Am.  St.  Rep.  614).  See  "Bills  and 
Notcsr  Dec.  DUi.  {Key  ^o.)  §  386;    Cent.  Dig.  §§  1051-105h 

43Townsley  v.  Sumrall.  2  Pet.  170,  7  L.  Ed.  3S6:  Chatham  Bank 
V.  Allison.  15  Iowa,  357 ;  Ellis  v.  Bank,  7  How.  (Miss.)  294,  40  Am. 
Dec.  63;  Simpson  v.  White,  40  N.  H.  540;  Carter  v.  Union  Bank, 
7  Humph.  (Ten'n.)  548.  46  Am.  Dec.  89. 

A  drawer  of  a  bill  is  discharged  by  failure  to  protest,  where  pro- 
test is  required  by  the  law  of  the  place  where  the  bill  is  drawn, 
though  protest  be  not  required  by  the  law  of  the  place  where  the 
bill  is  payable.  Amsinck  v.  Rogers.  189  N.  Y.  252,  82  N.  E.  134,  12 
L.  R.  A.  (N.  S.)  875,  121  Am.  St.  Rep.  858.  See  "Bills  and  Notes;' 
Dec.  Dig.  (Key  No.)  §  386;   Cent.  Dig.  §§  1051-1054. 

4  4  See  Morse,  Banks  &  B.  (4th  Ed.)  §  220. 

4  5  Milwaukee  National  Bank  v.  City  Bank,  103  U.  S.  068,  26  L.  Ed. 
417 ;  Central  Georgia  Bank  v.  Cleveland  Nat.  Bank,  59  Ga.  667 ;  Lord 
V.  Hingham  Nat.  Bank,  186  Mass.  161,  71  N.  E.  312 ;  Finch  v.  Karste, 
97  Mich.  20,  56  N.  W.  123 ;  Omaha  Nat.  Bank  v.  Kiper,  60  Neb.  33, 
82  N.  W.  102;  First  Nat;  Bank  of  Texarkana  v.  Munzesheimer  (Tex. 
Civ.  App.)  20  S.  W.  428.  See  Long  v.  Bank  of  Commerce  (Ky.) 
38  S.  W.  886.  See  "Banks  and  Banling,"  Dec.  Dig.  (Key  No.)  §§  161, 
111,  r,2;    Cent.  Dig.  §§  55J,-56-',,  597-628. 

40  Borup  V.  Niuiuger,  5  Minn.  523  (Gil.  417).  See  "Banks  and 
Banking,"  Uee.  Dig.  {Key  No.)  §§  161,  171,  172;  Cent.  Dig.  §§  55',- 
564,  597-628. 


§  51)  DUTIES   OF    BANK    IN    MAKING    COLLECTION  201 

Good  faith— Securing  Priority 

It  is  the  duty  of  a  collecting  bank  to  exercise  good  faith  and 
loyalty  towards  its  customer  in  the  business  intrusted  to  it. 
It  has  been  held,  however,  that  this  duty  does  not  prevent  a. 
l.iank  which  holds  a  claim  against  the  drawee  of  a^draft  placed 
in  its  hands  for  collection,  where  it  has  not  been  instructed  to 
bring  suit,  from  securing  priority  of  its  own  claim  by  attach- 
ment;  ■*"  and  this,  although  it  fails  to  obtain  security  for  the 
customer's  claim,  provided  it  makes  due  presentment  and  is 
guilty  of  no  misrepresentation  or  fraudulent  concealment.** 
Ikit  where  the  bank  is  instructed  to  place  the  claim  in  the  hands 
of  attorneys  for  suit,  and  fails  to  do  so  until  it  has  secured  its 
own  claim,  it  is  liable  for  any  resulting  loss.*"  So,  where  the 
bank  grants  time  to  the  debtor,  without  commuiaicating  with  its 
customer,  and  in  the  meantime  secures  a  preference.'^** 

Medium  of  Payment 

Authority  to  collect  means  authority  to  receive  payment  in 
legal  ctirrency ;  that  is,  in  legal  tender  or  what  is  by  common 
consent  tendered  and  passes  as  such  at  par.^^  Unless  specially 
authorized  to  do  so,  a  collecting  bank  may  not  receive  in  pay- 


4  7  Freeman  v.  Citizens'  Nat.  Bank,  78  Iowa,  150,  42  N.  W.  632, 
4  L.  R.  A.  422.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§ 
171,  112;    Cent.  Dig.  §§  591-628. 

4s  United  States  Bank  v.  Westervelt,  55  Neb.  424,  75  N.  W.  857. 
See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  Ko.)  §§  157,  171,  172;  Cent. 
Dig.  §§  539-5J,6,  597-628. 

4  9  Finch  V.  Karste,  97  Micli.  20,  56  N.  W.  123.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §§  171,  172;   Oent.  Dig.  §§  597-628.      ' 

so  Dern  v.  Kellogg,  54  Neb.  560,  74  N.  W.  844.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §§  171,  172;   Cent.  Dig.  S§  597-628. 

51  Ward  V.  Smith,  7  Wall.  447,  19  L.  Ed.  207;  Midland  Nat.  Bank 
V.  Brightwell,  148  Mo.  358,  49  S.  W.  494;  Whipple  v.  Walker,  2 
Thomp.  &  C.  (N.  Y.)  456.  See  cases  generally  cited  under  this  para- 
graph. See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  161,  162, 
171,  172;    Cent.  Dig.  §§  55Jf-566,  597-628. 


202  COLLECTIONS  (Ch.  G 

ment  a  bill  or  a  note/'-  or  a  check,  even  if  it  be  certified." 
If  a  bank  accepts  a  check  in  lieu  of  payment  of  paper  intrusted 
to  it  for  collection,  it  assumes  the  risk  of  payment  of  the  check, 
and  is  liable  for  any  resulting  loss.^*  A  usage  of  banks  in  col- 
lecting drafts  to  surrender  them  to  the  drawees  on  receiving 
checks  for  payment  has  been  held  unreasonable/^     But  the 

5  2  Scott  V.  Gilkey,  153  111.  168,  39  N.  E.  265.  See  "Banks  and 
Bankingr  Dec.  Dig.  {Key  No.)  §§  161,  162,  111,  112;  Cent.  Dig.  §§ 
554-566.  591-628. 

5  3  Essex  County  Nat.  Bank  v.  Bank  of  Montreal,  Fed.  Cas.  ^o. 
4.532,  7  Biss.  193 ;  German-American  Bank  v.  Third  Nat.  Bank,  Fed. 
Cas.  No.  5,359;  Levi  v.  National  Bank  of  Missouri,  Fed.  Cas.  No. 
8.289,  5  Dill.  104.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  55§ 
161,  162,  111,  112:    Cent.  Dig.  §§  55^-566,  591-628. 

54  Bank  of  Antigo  v.  Union  Trust  Co.,  149  111.  343,  36  N.  E.  1029, 
23  L.  R.  A.  Gil;  National  Bank  of  Conamerce  v.  American  Exch. 
Bank,  151  Mo.  320,  52  S.  W.  265,  74  Am.  St.  Rep.  527;  Landa  v. 
Traders'  Bank  of  Kansas  City,  118  Mo.  App.  356,  94  S.  W.  770;  Fifth 
Nat.  Bank  v.  Ashworth,  123  Pa.  212.  16  Atl.  596,  2  L.  R.  A.  491  (cash- 
ier's check).  See,  also,  Morris  v.  Enfaula  Nat.  Bank,  106  Ala.  383,  18 
South.  11. 

In  some  cases  it  seems  to  be  intimated  that,  notwithstanding  the 
check  is  dishonored,  if  the  bank  used  the  utmost  diligence  in  pre- 
senting it,  and  upon  its  dishonor  reclaims  it  in  sufficient  time  to 
take  the  necessary  steps  to  charge  any  parties  secondarily  liable  on 
the  paper  for  which  the  check  was  given,  the  bank  is  guilty  of  no 
negligence.  See  First  Nat.  Bank  of  Meadville,  Pa.,  v.  Fourth  Nat. 
Bank  of  New  York,  77  N.  Y.  320,  33  Am.  Rep.  618  (cf.  Kirk  ham  v. 
Bank  of  America,  165  N.  Y.  132,  58  N.  E.  753,  80  Am.  St.  Rep.  714) ; 
Comer  v.  Dafour,  95  Ga.  376,  22  S.  E.  543,  30  L.  R.  A.  300,  51  Am. 
St.  Rep.  89 ;  Noble  v.  Doughten,  72  Kan.  336,  83  Pac.  1048,  3  L.  R.  A. 
(N.  S.)  1167 ;  Anderson  v.  Gill,  79  Md.  312,  29  Atl.  527,  25  L.  R.  A. 
200,  47  Am.  St.  Rep.  402. 

Where  the  bank  receives  in  payment  of  a  draft  the  drawee's  check, 
but  sends  the  draft  with  the  check  to  the  drawee  bank,  to  be  deliver- 
ed on  payment  of  the  check,  and  the  check  is  not  paid,  nor  the 
draft  delivered,  the  bank  is  not  liable.  Second  Nat.  Bank  of  Co- 
lumbia V.  Cummings,  89  Tenn.  609,  18  S.  W.  115,  24  Am.  St.  Rep.  618. 
See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  161,  162,  111,  112; 
Cent.  Dig.  §§  554-566,  591-628. 

5  5  National  Bank  of  Commerce  v.  American  Exch.  Bank,  151  Mo. 
320,  52  S.  W.  265,  74  Am.  St.  Rep.  527.    See,  also.  Noble  v.  Doughten, 


§  51)  DUTIES    OF    BANK    IN    MAKING    COLLECTION  203 

bank  may  receive  payment  by  a  check  drawn  on ,  itself  by  a 
debtor  who  has  a  syfificient  deposit,  since  the  bank  need  not  go 
through  the  form  of  paying  to  the  debtor  the  money  and  receiv- 
ing it  baclv.^®  So  it  has  been  held  that  the  bank  may  accept  in 
payment  its  own  certificate  of  deposit-.'i'  It  is  not  within  the 
authority  of  the  bank  to  receive  partial  payment.''^ 

Surrender  of  Attached  Bills  of  Ladiiio; 

Where  a  bank  receives  for  collection,  without  special  in- 
structions, a  time  draft  with  an  attached  bill  of  lading,  even 
if  it  makes  the  goods  deliverable  to  the  order  of  the  consignor, 
it  has  been  held  that  the  bank  may  surrender  the  bill  of  lading 
to  the  drawee  on  his  acceptance  of  the  draft,  upon  the  ground 
that  the  transaction  upon  its  face  is  a  sale  by  the  drawer  to 
the  drawee  upon  credit,  and  that  accordingly  the  bill  of  lading 
is  a  security  only  for  the  acceptance,  and  not  for  the  payment 
of  the  draft. ^°    Other  cases  upon  substantially  the  same  facts 

72  Kan.  33G,  S3  Pac.  1048,  3  L.  R.  A.  (N.  S.)  1167.  In  Jefferson  Coun- 
ty Sav.  Bank  v.  Commercial  Nat.  Bank.  08  Tenn.  337.  39  S.  W.  338,  a 
usage  of  local  banks  to  accept  in  payment  certified  checks  was  held 
•reasonable.  8cc  "Banks  and  Bankinfj,"  Dec.  Dig.  {Key  Xo.)  §§  161, 
162.  171,  172;    Cent.  Diy.  §§  55.'/-566,  597-62S, 

5  6  Welge  V.  Batty,  11  111.  App.  461;  Billingsley  v.  Pollock,  69  Miss. 
759.  13  South.  828,  30  Am.  St.  Rep.  5So ;  Sayles  v.  Cox,  95  Tenn.  579, 
.32  S.  W.  626,  32  L.  R.  A.  715,  49  Am.  St.  Rep.  940.  Contra:  State 
Bank  V  Byrne,  97  Mich.  178,  56  N/  W.  355,  21  L.  R.  A.  753,  37  Am.  St. 
Rep.  60^.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  161, 
162,  171,  172;    Cent.  Dig.  §§  55J,-566^  597-628. 

67  British  &  Amer.  Mortg.  Co.  v.  Tibb'alls,  63  Iowa,  468,  19  N.  W. 
319  (cf.  Bank  of  Montreal  v.  Ingersou,  105  Iowa,  349,  75  N.  W.  351). 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  161,  162,  171,  172; 
Cent.  Dig.  §§  55Jt-566,  597-628. 

5  8Lowenstein  v.  Bresler,  1C9  Ala.  326,  19  South.  860.  See  "Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §§  161,  162,  171,  172;  Cent.  Dig. 
§§  55Jf-566,  597-628. 

59  National  Bank  of  Commerce  v.  Merchants'  Nat.  Bank,  91  U.  S. 
92.  23  L.  Ed.  208;  Woolen  v.  New  York  &  Erie  Bank,  Fed.  Cas.  No. 
1S.02C,  12  Blatchf.  3.59;  Connnercial  Bank  of  Manitoba  v.  Chicago,  St. 
l".  i^v-  K.  C.  Ry.  Co..  KiO  111.  401,  43  N.  E.  756;  Moore  v-.  Louisiana 
Nat.  Bank,  44  La.  Ann.  99,  10  South.  407,  32  Am.  St.  Rep.  332.     See 


204 


COLLECTIONS  (Ch.  0 


hold  that,  if  the  bill  of  lading  makes  the  goods  deliverable  to 
the  order  of  the  consignor,  the  bank  is  not  authorized  to  sur- 
render the  bill  without  payment  of  the  draft,  upon  the  ground 
that  making  the  goods  so  deliverable  is  almost  conclusive  evi- 
dence of  an  intention  on  the  part  of  the  consignor  to  retain 
the  jus  disponendi  and  to  reserve  the  property  in  goods,  and 
that  such  intention  negatives  the  inference  that  the  sale  was 
on  credit  and  that  consequently  the  bill  of  lading  was  to  be 
surrendered  upon  acceptance  of  the  draft. «"  While  it  is  true 
that,  w^here  by  the  bill  of  lading  the  goods  are  deliverable  to  the 
order  of  the  seller  or  his  agent,  prima  facie  he  reserves  the 
property  in  the  goods,"  yet  it  is  entirely  consistent  with  this 
reservation  that  the  property  shall  pass  upon  acceptance  of 
the  draft,  rather  than  upon  its  payment — in  other  word^, 
that  the  seller  intends  a  sale  upon  credit ;  and  it  is  submitted 
that  the  cases  last  referred  to  are  erroneous.  The  rights  of 
the  bank,  where  it  discounts  or  purchases,  a  draft  with  an  at- 
tached bill  of  lading,  will  be  considered  later.®^ 


RIGHTS  AND  LIABILITIES  AS  TO  PROCEEDS  OF 
COLLECTION 

52.  RELATION  OF  BANK  Vo  CUSTOMER— When  pa- 
per intrusted  to  a  bank  for  collection  has  been  col- 
lected, by  weight  of  authority,  the  bank  becomes, 
in  the  absence  of  an  agreement  to  the  contrary,  a 

/ 

''Banl's  and  Banlcmir  Bee.  Dig.  {Kci/  Xo.)  §§  161,  162;   Cent.  Dig.  §§ 
55.'f-566. 

60  W.  &  A.  McArthur  Co.  v.  Old  Second  Nat.  Bank,  122  Mich.  223, 
81  N.  W.  92  (biglit  draft,  but.  being  entitled  to  three  days  grace, 
equivalent  to  a  time  draft);  Security  Bank  of  Minnesota  v.  Lutt- 
gen,  29  Minn.  3G3,  13  N.  W.  151;  Second  Nat.  Bank  of  Columbia  v. 
C*ummings,  89  Tenn.  G09,  18  S.  W.  115,  24  Am.  St.  Rep.  618.  See 
"Bunks  and  Bankiiuj,"  Dec.  Dig.  (Key  No.)  §§  161,  162,\  Cent.  Dig.  §§ 
oo-'i—oOl). 

61  Tiffany,   Sales   (2d   Ed.)    1G2.  «2  Post,  p.  252. 


§§  52-54)       RIGHTS   AND   LIABILITIES    AS    TO    PROCEEDS  205 

debtor  to  its  principal  for  the  amount  which  it  has 
received;    but  some  cases  hold  that  the  bank  be- 
'  comes  a  trustee.  -*^ 

53.  INSOLVENCY    OF    BANK— The    authority    of    the 

bank  to  collect  is  terminated  upon  its  insolvency, 
and  money  thereafter  received  in  payment,  at  least 
if  the  insolvency  be  known  to  the  bank's  officers, 
will  be  held  in  trust  for  the  principal,  who  can  re- 
cover it  in  preference  to  the  bank's  general  credit- 
ors, if  the  fund  can  be  traced  into  the  hands  of  the 
bank's  receiver. 

54.  BANK'S  LIEN — A  bank  has  a  general  lien  upon  paper 

deposited  with  it  in  the  usual  course  of  business 
for  collection,  and  upon  the  proceeds  of  such  paper, 
for  any  balance  due  to  it  from  the  customer  upon 
general  account. 

Relation  of  Bank  to  Customer 

When  the  bank  has  collected  the  paper,  it  becomes,  as  a 
rule,  a  debtor  to  the  customer  for  the  amount  collected.  In 
this  respect  a  bank  differs  from  an  ordinary  collecting  agent, 
whose  duty  it  is  to  keep  the  money  of  his  principal  separate 
from  his  own,  and  who  holds  the  proceeds  of  collection  in 
trust.  The  rule  applicable  to  collections  by  banks  arises  from 
the  usage  of  banks  to  mingle  the  proceeds  of  collection  with 
their  own  funds. '"^  "One  who  collects  commercial  paper 
through  the  agency  of  banks  must  be  held  to  impliedly  con- 
tract that  the  business  may  be  done  according  to  their  well- 

6  3  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50,  13  Sup.  Ct. 
5.33,  37  L.  Ed.  363;  Fir.st  Nat.  Bank  v.  Wilmington  &  W.  R.  Co., 
77  Fed.  401,  23  C.  C.  A.  200 ;  Freeman's  Nat.  Bank  v.  National  Tube 
Works,  151  Mass.  413,  24  N.  E.  779,  8  L.  R.  A.  42,  21  Am.  St.  Rep. 
4()1 ;  First  Nat.  Bank  of  Richmond  v.  Davis,  114  N.  C.  343,  19  S.  E. 
2S0,  41  Am.  St.  Rep.  795 ;  National  Bank  of  Commerce  of  Seattle  v. 
Johnson,  6  N.  D.  180,  69  N.  W.  49,  See  "Hanks  and  Banking,"  Dec. 
Di;/.  (Key  ^0.)  §  165:    Cent.  BUi.  §S  57^-88.5. 


206  COLLECTIONS  (Ch.  0 

known  usages,  so  far  as  to  permit  the  money  collected  to  be 
mingled  with  the  funds  of  the  collecting  bank."  ^'^  From  this 
it  follows  that,  when  the  paper  has  been  collected,  the  relation 
changes  from  that  of  agent  and  principal  to  that  of  debtor  and 
creditor.*'^  If,  after  collection,  the  bank  becomes  insolvent,  the 
customer  has  simply  the  rights  of  a  general-  creditor,  without 
preference  over  the  other  creditors.*'*'  This  distinction  is  lost 
sight  of  by  some  cases,  Avhich  hold  that  the  collecting  bank 
is  a  trustee.^"     In  these  cases,  for  the  most  part,  the  question - 

e-t  Freeman's  Nat.  Bank  v.  National  Tube  Works.  1.51  Mass.  413. 
24  N.  E.  779.  S  L.  R.  A.  42.  21  Am.  St.  Rep.  461.  See  "Banks  and 
Bnnkino"  Dec.  Bin.  {Kcv  A'O.)  §  165;   Cent.  Dig.  §§  511-585. 

6  5  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  .50,  13  Sup.  Ct. 
533,  37  L.  Ed.  363 ;  First  Nat.  Bank  v.  Bank  of  Monroe  (C.  C.)  33 
Fed.  408 ;  Aubeuser-Buscli  B.  Co.  v.  Clayton,  56  Fed.  759,  6  C.  C.  A. 
108;  First  Nat.  Bank  v.  Wilmington  &  W.  R.  Co.,  77  Fed.  ,401, 
23  C.  C.  A.  200;  Tlnkham  v.  Heyworth,  31  111.  519;  Union  Nat. 
Bank  v.  Citizens'  Bank,  153  Ind.  44.  54  N.  E.  97;  People  v.  City 
Bank  of  Rochester,  93  N.  Y.  582;  National  Butchers'  &  Drovers' 
Bank  v.  Hubbell,  117  N.  Y.  384,  22  N.  E.  1031,  7  L.  R.  A.  852,  lo  Am. 
St.  Rep.  515 ;  First  Nat.  Bank  of  Richmond  v.  Davis,  114  N.  C.  343, 
19  S.  E.  280,  41  Am.  St.  Rep.  795 ;  North  Carolina  Corporation  Com- 
mission V.  Merchants'  «fe  Farmers'  Bank,  137  N.  C.  697,  50  S.  E. 
308;  Akin  v.  Jones.  93-Tenn.  353,  27  S.  W.  669,  25  L.  R.  A.  523, 
42  Am.  St.  Rep.  921;  Klepper  v.  Cox,  97  Tenn.  534,  37  S.  W.  285, 
34  L.  R.  A.  536,  56  Am.  St.  Rep.  823;  Bowman  v.  First  Nat.  Bank, 
9  Wash.  614,  38  Pac.  211,  43  Am.  St.  Rep.  870;  Hallern  v.  Tilling- 
hast,  19  Wash.  20,  52  Pac.  329;  Peters'  Shoe  Co.  v.  Murray,  31 
Tex.  Civ.  App.  259,  71  S.  W.  977.  See  "Banks  and  Banking;'  Dec. 
Dig.  (Key  No.)  §  165;    Cent.  Dig.  §§  .511-585. 

66  Commercial  Nat.  Bank  v.  Armstrong.  148  U.  S.  50.  13  Sup.  Ct. 
533,  37  L.  Ed.  363;  Franklin  County  Nat.  Bank  v.  Beal  (C.  C.)  49 
Fed,  606;  Union  Nat.  Bank  v.  Citizens'  Bank,  1.53  Ind.  44,  54  N. 
E.  97;  State  ex  rel.  Girardey  v.  Southern  Bank,  33  La.  Ann.  957; 
Billingsley  v.  Pollock,  69  Miss.  759,  13  South.  828,  30  Am.  St.  Rep. 
585;  People  v.  City  Bank  of  Rochester,  93  N:  Y.  582.  See  "Banks 
.  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  166,  167;   Cent.  Dig.  §§  574-586. 

6  7  Winstanley  v.  Second  Nat.  Bank,  13  Ind.  App.  544,  41  N.  E.  956 
(but  see  Union  Nat.  Bank  v.  Citizens'  Bank,  153  Ind.  44,  54  N.  E. 
97);    Nurse  v.  Satterlee,  81  Iowa.  491,  46  N.  W.  1102;    Kansas  State 


>.§  52-54)       RIGHTS    AND   LIABIT.ITIE:=;    AS    TO    PKOCEEDS  207 

was  presented  where  a  collection  had  heen  hefore  the  "n- 
solvency  of  the  hank,  and  the  discussion  was  mainly  directed 
to  the  question  whether  the  fund  could  he  traced  into  the  as- 
sets of  the  bank  or  into  the  hands  of  its  receiver ;  a  trust  rela- 
tion being  taken  for  granted.  Of  course,  the  bank  will  be  held 
to  be  a  trustee  if  it  appears  that  such  was  the  understanding.^^ 

Instructions  to  Remit 

Where  the  customer  is  a  depositor  of  the  collecting  bank,  the 
proceeds  are  ordinarily  credited  to  his  account  and  become 
subject  to  his  check.  If  the  paper  is  forwarded  to  the  col- 
lecting bank  with  instructions  to  remit,  it  seems  that  the  gen- 
eral rule  should  prevail ;  for  it  is  the  usage  of  banks  not  to 
keep  separate  and  remit  the  very  money  collected,  but  to  min- 
gle the  money  with  their  own  funds  as  in  other  cases  and  to 
remit  by  exchange ;  that  is,  by  a  draft,  usually  its  own  check, 
upon  another  bank  in  New  York  or  some  convenient  banking 
center.*^"  In  such  cases,  therefore,  many  cases  hold  that  where 
paper  is  forwarded  for  collection  and  remittance,  as  well  as 
where  it  is  forwarded  for  collection  and  credit,  the  relation 


Bank  v.  First  ^State  Bank,  62  Kan.  788.  64  Pac.  634;  Anheuser- 
Busch  B.  Ass'n  V.  Estate  of  Farmers'  &  M.  Bank,  36  Neb.  31,  53 
N.  W.  1037;  Thompson  v.  Gloucester  City  Sav.  Inst.  (N.  J.)  8  Atl. 
97;  McLeod  v.  Evans,  66  Wis.  401.  28  N.  W.  173,  214,  57  Am.  Rep. 
287  (overruled  on  a  point  involving  identification  of  fund  Nonotuck 
Silk  Co.  V.  Flanders,  87  Wis.  237,  58  N.  W.  383). 

Where  the  collection  is  for  a  stranger,  a  trust  attaches.  Piano 
Mfg.  Co.  V.  Auld,  14  S.  D.  512,  86  N.  W.  21.  86  Am.  St.  Rep.  769 
(cf.  McCormick  Harvesting  Mach.  Co.  v.  Yankton  Sav.  Bank,  15  S. 
D.  196,  87  N.  W.  974).  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  165,  166,  167;   Cent.  Dig.  §§  571-586. 

6  8  Continental  Nat.  Bank  v.  Weems,  69  Tex.  489,  6  S.  W.  802,  5 
Am.  St.  Rep,  85.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§ 
165-170;    Cent.  Dig.  §§  57i-596. 

6  0  Farmers'  Bank  &  Trust  Co.  of  Stanford  v.  Newland.  97  Ky.  464, 
31  S.  W.  38 ;  Bowman  v.  First  Nat.  Bank,  9  Wash.  614.  38  Pae.  211, 
43  Am.  St.  Rep.  870.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  165-170;  Cent.  Dig.  |?§  .571-596. 


OQg  COLLECTION'S  (Ch.  0 

after  collection  is  simply  that  of  debtor  and  creditor.""  Other 
cases  hold,  however,  that  in  such  cases  a  trust  relation  arises.'^ 
It  seems  that  these  cases  ignore  banking  usages,  \vhich,  in  the 
absence  of  evidence  of  a  different  understanding,  impliedly 
become  part  of  the  contract,  and  that  something  more  than 
mere  instruction  to  remit  is  required  to  show  a  different  un- 
derstanding and  to  create  a  trust  relation,  as,  for  example,  an 
understanding  that  the  proceeds  are  to  be  preserved  as  the 
property  of  the  customer  and  returned  to  him  as  such/^ 

Insolvency  of  Bank 

A  bank  has  no  right  to  receive  paper  for  collection  when 
n  is  insolvent.  Such  conduct,  if  the  insolvency  be  known  to 
its  officers,  is  a  fraud.  While  the  paper  remains  uncollected, 
the  customer  can  demand  it  back  from  a  receiver  of  the  bank.'^ 


70  Fir.st  Nat.  Bank  v.  Wilmington  &  W.  R.  Co.,  77  Fed.  401,  23 
C.  C.  A.  200 ;  G.  Ober  &  Sons  Co.  v.  Cochran,  118  Ga.  396,  45  S.  E. 
382,  98  Am.  St.  Rep.  118;  Union  Nat.  Banli  v.  Citizens'  Bank,  153 
Ind.  44,  54  N.  E.  97;  First  Nat.  Bank  of  Richmond  v.  Davis,  114 
N.  C.  343,  19  S.  'E.  280,  41  Am.  St.  Rep.  795 ;  Akin  v.  Jones,  63  Teiiu. 
353,  27  S.  W.  009,  25  L.  R.  A.  523,  42  Am.  St.  Rep.  921.  See,  also, 
Philadelphia  Nat.  Bank  v.  Dowd  (C.  C.)  38  Fed.  172,  2  L.  R.  A. 
480 ;  Merchants'  &  Farmers'  Bank  v.  Austin  (C.  '  C.)  48  Fed.  25. 
See  "Banks  and  Banking,''  Dec.  Duj.  {Key  Xo.)  §§  165-110;  Cent. 
Dig.  §§  571-596. 

Ti  Boone  County  Nat.  Bank  v.  Latimer  (C.  C.)  G7  Fed.  27  (semble) ; 
Holder  v.  Western  German  Bank,  136  Fed.  90,  68  C.  C.  A.  554  (sem- 
ble);  Hutchinson  v.  National  Bank,  145  Ala.  196,  41  South.  143; 
Wallace  v.  Stone,  107  Mich.  190,  65  N.  W'.  113;  Griffin  v.  Chase, 
30  Neb.  328,  54  N.  W.  572.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  Ao.)  §§  165-110;   Cent.  Dig.  §§  .511-596. 

T2  Continental  Nat.  Bank  v.  Weems,  69  Tex.  489.  6  S.  W.  802,  5  Am. 
St.  Rep.  85.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§  165- 
110;    Cent.  Dig.  §§  511-596. 

7  3  Richardson  v.  Denegre,  93  Fed.  572,  35  C.  C.  A.  452.  See 
"Banks  and  Banking,"  Dec.  Dig.   {Key  Xo.)  §§  166,  161;    Cent.  Dig. 


\ 

^§  62-54)       RIGHTS    AND    LIABILITIES   AS   TO    IROCEEDS  209 

If  the  bank  or  the  receiver  collects  the  paper,  it  or  he  will 
hold  the  proceeds  as  constructive  trustee  for  the  customer, 
who  may  recover  the  amount  from  the  receiver,  provided  the 
funds  can  be  sufficiently  identified  and  traced  int(5^e  receiv- 
er's hands,"''  but  not  otherwise.''  If  the  bank  becomes  in- 
solvent after  receiving  the  paper,  the  agency  to  collect  is 
thereby  revoked,  and  the  paper  does  not  pass  t6  the  bank's 
receiver ;  and  if  it  be  collected  by  the  bank,  and  the  proceeds 
afterwards  come  into  the  hands  of  the  receiver,  or  if  it  be 
collected  by  him,  he  will  hold  the  proceeds  as  trustee  for  the 
customer.^*'  If  the  paper  has  been  forwarded  by  the  depos- 
itary bank  for  collection  to  another  bank,  which  collects  it 
when  the  depositary  bank  is  insolvent,  the  customer  may  re- 

T4  8t.  Louis  &  S.  F.  Ry.  Co.  v.  Johnston.  133  U.  S.  566.  10  Sui). 
Ct.  390,  33  L.  Ed.  683;  Illinois  Trust  &  Savings  Co.  v.. First  Nat. 
Bank  (C.  C.)  15  Fed.  858;  Beal  v.  National  Exch.  Bank  of  Dallas 
(C.  C.)  50  Fed.  355 ;  Id.,  55  Fed.  894,  5  C.  C.  A.  304 ;  Western  Ger- 
man Bank  v.  Norvell,  134  Fed.  724,  69  C.  C.  A.  330;  Henderson  v. 
O'Conor,  106  Cal.  385,  39  Pac.  786 ;  Showalter  v.  Cox,  97  Tenn.  547, 
37  S.  W.  286;  Bruner  v.  First  Nat.  Bank,  97  Tenn.  540,  37  S.  W. 
286,  34  L.  R.  A.  532  (cf.  Sayles  v.  Cox.  95  Tenn.  579,  32  S.  W.  626. 
32  L.  R.  A.  715,  49  Am.  St.  Rep.  940).  Post,  p.  354.  See  "Banks  and 
Banking:'  Dec.  Dig.  (Key  No.)  §§  166,  161;   Cent.  Dig.  §§  57-J-.586. 

-  5  In  re  Seven  Corners  Bank,  58  Minn.  5.  59  N.  TV.  633 ;  Frank  v. 
Bingham,  .58  Hun,  580,  12  N.  Y.  Supp.  767;  Freiberg  v.  Stoddard, 
161  Pa.  259,  28  Atl.  1111;  Nonotuck  Silk  Co.  v.  Flanders,  87  Wis. 
237,  58  N.  W.  383  (overruling  McLeod  v.  Evans,  66  Wis.  401,  28  N. 
W.  173,  214,  57  Am.  Rep.  287).  See  "Banks  and  Banking"  Dec. 
Dig.  (Key  No.)  §§  166,  161;   Cent.  Dig.  §§  .57^-086. 

7  6  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50,  13  Sup.  Ct. 
533.  37  L.  Ed.  363;  German-American  Nat.  Bank  v.  Third  Nat. 
Bank,  Fed.  Cas.  No.  5,359 ;  Levi  v.  National  Bank,  Fed.  Cas.  No. 
8.289,  5  Dill.  104;  National  Butchers'  &  Drovers"  Bank  v.  Hubbell, 
117  N.  Y.  384.  22  N.  E.  1031,  7  L.  R.  A.  852,  15  Am.  St.  Rep.  515; 
Bank  of  Clarke  County  v.  Gilman,  81  Hun.  486,  30  N.  Y;  Supp.  1111 ; 
Guignon  v.  First  Nat.  Bank,  22  Mont.  140,  55  Pac.  1051,  1097.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  166,  161 ;  Cent.  Dig. 
§§  514-586. 

Tiff.Bks.&  B.— 14 


•JIO 


COLLECTIONS  -         '  (Ch.  6 


cover  the  amount  from  the  collecting  bank,"  subject  to  its 
lien,  if  any.'* 

Bank's  Lien 

It  has  already  been  seen  that  a  bank  has  a  right  of  set-off, 
sometimes  called  a  lien,  by  virtue  of  which  it  may  apply  a 
general  deposit  to  the  payment  of  a  debt  of  the  depositor.'^ 
In  addition  to  this,  in  the  absence  of  anything  to  show  a  con- 
trary intention,  a  bank  has  a  general  lien.^"  strictly  speaking, 
upon  all  securities  deposited  with  it  by  a  customer  in  the  usual 
course  of  business,  including  paper  deposited  for  collection, 
and  its  j)roceeds,  for  any  balance  due  the  bank  on  general 
account.^^    The  lien  arises  from  the  implied  understanding  of 

7  7  Armstrong  v.  National  Bank  of  Boyertown,  90  Ky.  431.  14  S. 
\V.  411,  9  L.  R.  A.  553 ;  Manufacturers'  Nat.  Bank  v.  Continental 
Bank,  148  Mass.  558,  20  N.  E.  193,  2  L.R.  A.  699,  12  Am.  St.  Rep. 
598;  Importers'  &  Traders'  Bank  v.  Peters,  123  N.  Y.  272,  25  N 
E.  319 ;  Nash  v.  Second  Nat.  Bank,  67  N.  J.  Law,  265,  51  Atl.  727. 
See  ''Banks  and  Banking,"''  Dec.  Dig.  {Key  No.)  §§  166,  16T ;  Cent. 
Dig.  §§  51Ii-586. 

-»  Post,  p.  220.  7  9  Ante,  p.  222. 

so  The  right  of  the  bank  in  respect  to  paper  negotiated  to  and 
deposited  with  it  is  greater  than  a  mere  possessory  lien,  since  the 
bank  may  sue  and  recover  thereon  at  least  to  the  amount  of  the 
lialance  due.  Scott  v.  Franklin,  15  East,  428 ;  Percival  v.  Frempton. 
2  d  M.  &  R.  ISO;  Russell  v.  Hadduck,  8  111.  233,  44  Am.  Dec.  693. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  159 y  Cent.  Dig.  §§ 
547-553. 

81  Miser  t.  Currie,  1  App.  Cas.  554;  London  Chartered  Bank  v. 
White,  4  App.  Cas.  413 ;  Brandao  v.  Barnett,  12  C.  &  F.  786 ;  Joyce 
V.  Cockrill,  179  U.  S.  591,  21  Sup.  Ct.  227,  45  L.  Ed.  332;  Bank  of 
the  Metropolis  v.  New  England  Bank,  1  How.  234,  11  L.  Ed.  115; 
Kelly  V.  Phelan,  Fed.  Cas.  No.  7,G73 ;  Cockrill  v.  Joyce,  62  Ark. 
216,  35  S.  W.  221 ;  Wood  v.  Boylston  Nat.  Bank,  129  Mass.  358,  37 
Am.  Rep.  306 ;  Gibbons  v.  Hecox,  105  Mich.  509,  63  N.  W.  519,  .55  Am. 
St.  Rep.  463 ;    Greene  v.  Jackson  Bank,  18  R.  I.  779,  30  Atl.  963. 

Under  an  Idaho  statute,  declaring  that  a  banker  has  a  general 
lien  dependent  on  possession  on  all  property  in  his  bands  belonging 
to  a  customer  for  the  balance  due  in  the  course  of  the  business,  the 
lien  does  not  include  stocks  of  merchandise,  etc.,  which  cannot  con- 


§§  52-54)       RIGHTS   AND    LIABILITIES    AS   TO    PROCEEDS  211 

the  parties  that  credit  is  to  be  ,i;iven  in  the  course  of  dealings 
between  them  by  the  bank  to  the  customer  upon  the  faith  of 
the  securities;  and,  therefore,  the  lien  does  not j) rise  where 
a  jnirticular  course  of  dealing  or  special  circumstances  are  in- . 
consistent  with  such  a  lien,  as  where  the  deposit  is  for  a  spe- 
cific purpose,**-  or  where  securities  are  accidentally  left  in  the 
possession  of  the  bank  after  its  refusal  to  discount  or  loan 
upon  them,^^  or  where  securities  are  pledged  for  the  payment 
of  a  particular  loan  or  to  protect  the  bank  in  particular  trans- 
actions.^* 


venieiitly  pass  into  tlie  actual  possession  of  the  banker.  In  re  Gesas, 
14G'Fea.  734,  77  C.  C.  A.  291. 

Under  a  similar  statute,  it  was  held  that  a  banker,  in  addition 
to  riirhts  granted  by  assijinment  of  a  life  policy,  had  a  lien  for  the 
insured's  overdraft  on  a  paid-up  policy  issued  to  the  banker  in  lieu 
of  the  assigned  policy.  Crane  v.  Cameron,  71  Kan.  880,  81  Pac.  480. 
87  Pac.  4m.  See  '•Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  159: 
Cent.  Dig.  §§  547-553. 

8  2Reynes  v.  Dumont.  130  U.  S.  354.  9  Sup.  Ct.  486,  32  L.  Ed.  9.34; 
P^itzgerald  v.  State  Bank.  64  Minn.  469,  67  N.  W.  361 ;  Loyd  v.  Lynch- 
burg Nat.  Bank,  86  Va.  690.  11  S.  E.  104.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  159;   Cent.  Dig.  §§  5It'1-553. 

83  Lucas  V.  Dorrien,  7  Taunt.  278 ;  Bank  of  Montreal  v.  White, 
154  U.  S.  660,  14  Sup.  Ct.  1191,  26  L.  Ed.  307 ;  Hanover  Nat.  Bank 
of  New  York  v.  Suddath.  215  U.  S.  110,  .30  Sup.  Ct.  58,  54  L.  Ed. 
tl5;  Continental  Nat.  Bank  v.  Weems,  69  Tex.  489,  6  S.  W.  802, 
5  Am.  St.  Rep.  85.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  159:   Cent.  Dig.  §§  5Jn-5o3. 

8  4  Reynes  v.  Dumont,  130  U.  S.  354,  9  Sup.  Ct.  486,  32  L.  Ed.  934 ; 
Biebinger  v.  Continental  Bank,  99  U.  S.  143,  25  L.  Ed.  271;  Arm- 
strong V.  Cheniical  Nat.  Bank,  41  Fed.  234,  6  L.  R.  A.  226;  Masonic 
Sav.  Bank  v.  Bangs'  Adm'r,  84  Ky.  135,  4  Am.  St.  Rep.  197 ;  Teutonia 
Nat.  Bank  v.  Loeb,  27  La.  Ann.  110;  Pret^ident,  etc.,  of  Neponset 
Bank  v.  Leland,  5  Mete.  (Mass.)  259;  Brown  v.  New  Bedford  Inst, 
for  Sav.,  137  Mass.  262;  Furber  v.  Dane,  203  Mass.  108.  89  N.  E. 
227 ; '  Duncan  v.  Brennan,  83  N.  Y.  487 ;  Wyckoff  v.  Anthony,  90  N. 
Y.  442;  Bacon's  Adm'r  v.  Bacon's  Trustees,  94  Va.  686,  27  S.  E. 
576. 

In  such  case  an  additional  general  lien  may  be  expressly  created. 


212  COLLECTION'S  (Ch.  6 


COLLECTION  BY  CORRESPONDENT  BANK 

55.  RELATION  BETWEEN  DEPOSITOR  AND  DE- 
POSITARY AND  COLLECTING  BANKS— 
Where  paper  is  to  be  collected  at  a  different  place 
from  that  in  which  the  depositary  bank  is  situated, 
and  it  forwards  the  paper  to  a  correspondent  to 
make  the  collection,  in  the  absence  of  an  express 
agreement  between  the  depositor  and  the  deposi- 
tary bank  in  respect  to  its  undertaking,  different 
rules  prevail  in  different  jurisdictions  as  the  rela- 
tions created  between  the  depositor  and  the  banks. 
By  some  courts  it  is  held  that  the  depositary  bank 
is  responsible  to  the  depositor  for  the  acts  of  its 
correspondent  in  making  the  collection,  and  for  the 
proceeds  of  the  paper  if  it  be  collected  by  the 
correspondent,  and  that  the  correspondent  is  re- 
sponsible directly  to  the  depositary  bank,  sub- 
ject to  the  exception  that  if  the  depositor  re- 
vokes the  agency,  or  the  depositary  bank  be- 
comes insolvent,  the  correspondent  is  respon- 
sible for  moneys  which  it  has  collected  directly  to 
the  depositor.     By  other  courts  it  is  held  that  the 

Merchants'   Nat.  Bank  of  Savannah   v.  Demere,   92  Ga.   735,   19  S. 
E.  38. 

Notes  sent  to  a  bank  by  its  correspondent  for  discount  and  credit, 
which  such  banlc  refuses  to  rediscount,  cannot  be  held  by  it  as  col- 
lateral to  the  payment  of  a  loan  voluntarily  made  to  cover  an  over- 
draft, by  virtue  of  an  agreement  emliodiedjn  a  printed  form  prepared 
by  such  bank,  and  in  general  use  by  it,  which  gives  it  power  to 
appropriate  any  securities  "deposited  with  said  bank,  or  which 
may  be  in  any  wise  in  said  bank  or  under  its  control,  as  collateral 
security  for  loans  or  advances  already  made  or  hereafter  to  be  made 
to  or  for  account  of"  its  said  correspondent  by  said  bank,  "or  other- 
wise." Hanover  Nat.  Bank  of  New  York  v.  Suddath.  215  U.  S.  110, 
30  Sup.  Ct.  58.  54  L.  Ed.  115.  See  "Baiihs  and  liankhnj;'  Dec.  Dig. 
(Kei/  yn.)  §§  ir,9.  17!j;    Cent.  Dig.  §§  5J,7-553'  667-6SS. 


§§  55-57)       COLLECTION    BY    CORREsiPONDENT   BANK  213 

depositary  bank  is  responsible  to  the  depositor  only 
for  due  care  in  selecting  a  collecting  bank  and  in 
forwarding  the  paper,  and  for  the  procea4s  of  the 
collection  when  it  has  received  them  by  remittance 
or  proper  credit  from  its  correspondent,  and  that 
the  collecting  bank  is  responsible  directly  to  the 
depositor  for  its  acts  in  making  the  collection,  and 
for  the  proceeds  when  collected  until  it  has  duly 
accounted  therefor  to  the  forwarding  bank. 

56.  SET-OFF    OF    COLLECTING    BANK    AGAINST 

FORWARDING  BANK— In  the  absence  of  direc- 
tions to  the  contrary,  a  bank  to  which  paper  was 
forwarded  by  an  agent  bank  for  collection  may  pay 
the  proceeds  to  the  forwarding  bank,  if  it  be  sol- 
vent, by  setting  off  the  amount  collected  against  a 
debt  to  it  from  that  bank  and  giving  it  credit  in 
account,  but  if  the  forwarding  bank  be  insolvent, 
the  collecting  bank  must  pay  the  proceeds  to  the 
depositor,  unless  it  has  a  lien  thereon. 

57.  LIEN    OF   COLLECTING   BANK— When   paper    is 

forwarded  by  one  bank  to  another  for  collection, 
unless  the  collecting  bank  has  notice,  by  the  form 
of  the  indorsement  or  otherwise,  that  the  forward- 
ing bank  is  not  the  owner  of  the  paper,  the  collect- 
ing bank  has  a  lien  thereon,  and  on  the  proceeds, 
not  only  for  any  advances  made  upon  the  paper, 
but,  in  most  jurisdictions,  for  any  general  balance 
against  the  forwarding  bank  which  has  been  allow- 
ed to  remain  to  be  met  by  the  proceeds  of  paper  to 
be  transmitted  for  collection  in  the  usual  course  of 
business.  ' 

Collection  by  Correspondent  Bank — In,  General 

Where  a  bank  receives  from  a  correspondent  for  collection 
paper  payable  at  a  distant  place,  the  parties  necessarily  con- 
template that  the  bank  shall  send  the  paper  to  the  place  where 


214  COLLECTION'S  (Ch.  G 

it  is  payable,  and  shall  employ  some  bank  or  other  agent  there 
to  collect  and  remit  the  proceeds  of  the  collection.  So  far  as 
the  debtor  or  drawee  is  concerned,  such  agent  is  the  agent^  of 
the  customer,  and  payment  to  the  agent  is  binding  upon  him. 
The  courts  are  divided,  however,  upon  the  question  whether 
privity  of  contract  is  created  between  the  principal— that  is, 
the  customer—  and  the  collecting  bank,  or  sul5agent,  so  that  the 
collecting  bank  is  directly  responsible  to  the  customer,  and  the 
depositary  bank,  or  agent,  is  responsible  only  for  due  care  in 
selecting  the  subagent,  or  whether  the  subagent  is  agent  of  and 
directly  responsible  to  the  depositary  bank,  and  it  is  responsi- 
ble to  the  customer  for  the  neglects  and  defaults  of  the  col- 
lecting bank. 

No  difficulty  arises  if  the  parties  have  expressed  their  in- 
tention in  this  regard,  as  where  it  is  agreed  that  the  depositary, 
bank,  in  receiving  the  paper  for  collection,  assumes  no  responsi- 
bility beyond  care  in  selecting  agents  at  other  points,  and  in 
forwarding  to  them.*^  Frequently  a  notice  to  this  effect  is 
contained  in  the  customer's  passbook  in  which  the  deposit  for 
collection  is  entered.*^  In  the  absence  of  any  express  or  im- 
plied agreement,  the  answer  to  the  question  is  made  to  depend 
upon  the  understanding  to  be  implied  from  the  deposit  of  the 
paper  for  collection,  and  in  their  interpretation  of  this  trans- 
action the  courts  have  taken  opposite  views,  and  are  about 
equally  divided.* '   By  some  courts,  including  the  Supreme  Court 

^s  McBricTe  v.  Illinois  State  Bank,  13S  App.  Div.  339,  121  N.  Y. 
Supy.  1041 ;  San  Francisco  Nat.  Bank  v.  American  Nat.  Bank  of 
Los  Angeles,  5  Cal.  App.  408,  90  Pac.  558  (local  usage).  See,  also. 
Holder  v.  Western  German  Bank  (C.  C.)  132  Fed.  187.  Cf.  First 
Nat.  Bank  of  Omaha  v.  First  Nat.  Bank,  55  Neb.  303,  75  N.  W.  843. 
,S'i'6  "Banks  and  Bankinrj"  Dec.  Dig  {Key  No.)  §§  156,  111,  172; 
Cent.  DUj'.  §§  539-5J,6,  597-628. 

JG  In  re  State  Bank,  56  Minn.  119,  57  N.  W.  33G,  45  Am.  St.  Rep. 
454.  Hee  "Bank.H  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  156,  111,  112; 
Cent.  Dig.  §§  539-5Ji6,  591-628. 

ST  Where  a  bank  in  Illinois  sent  for  collection  to  a  North  Carolina 
bank  a   draft  drawn  on  a  bank  of  that  state,  the  liability  of  the 


§§  55-57)   COLLECTION  BY   COUHKSPONDENT  BANK       215' 

of  the  United  States,  it  is  held  that  the  depositary  l)ank  un- 
dertakes to  collect  the  paper,  and  thus  assumes  the  liahility 
of  an  independent  contractor,  with  responsihility  foiUthe  acts 
and  defaults  of  its  suha.t^ents.""  By  other  courts  it  is  held 
that  the  depositary  haiik  merely  undertakes  to  use  due  care  in 
selecting-  a  suhagent  and  in  transmitting  the  paper,  and  that 
if  it  exercises  such  care  it  is  not  responsible  for  the  subagent's 
acts  and  defaults.^^ 


collecting  bank  was  governed  hy  the  law  of  North  Carolina,  and, 
the  question  there  being  an  open  one,  the  liability  was  to  be  de- 
termined by  the  general  principles  of  commercial  law.  the  New 
York  cases  being  approved.  Kent  v.  Dawson  Bank,  Fed.  Cas.  No. 
7,714,  13  Blatchf.  287. 

Where  a  bank  in  New  York  sent  for  collection  to  a  Tennessee 
bank  a  check  drawn  on  a  Texas  bank,  it  was  held  that  the  liability 
of  the  collecting  bank  was  determined  by  the  common  law  as  ex- 
pounded by  the  New  York  courts.  St.  Nicholas  Bank  of  New  York 
V.  State  Nat.  Bank,  128  N.  Y.  26,  27  N.  E.  849,  13  L.  R.  A.  241.  Sec 
"Banls  a)id  Banking,''  Dec.  Dig.  (Key  No.)  §§  156,  111,  172;  Cent. 
Dig.  U  53^^.1,6,  597-628. _ 

8  8  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  276,  5  Sup. 
Ct.  141,  28  L.  Ed.  722;  Mackersy  v.  Remsay,  9  9I.  &  F.  818;  Van 
Wart  V.  Wooley,  3  B.  &  C.  439;  Brown  v.  People's  Bank  for  Sav- 
ings of  St.  Augustine.  59  Fla.  163,  52  South.  719  (prior  to  Acts  1909, 
c.  5951);  Bailie  v.  Augusta  Sav.  Bank,  95  Ga.  277,  21  S.  E.  717, 
51  Am.  St.  Rep.  74 ;  Martin  v.  Hibernia  Bank  &  Trust  Co.,  127  La. 
301,  53  South.  572;  Simpson  v.  Waldby,  63  Mich.  439,  30  N.  W. 
199 ;  Streissguth  v.  National  German-American  Bank,  43  Minn. 
50,  44  N.  W.  797,  7  L.  R.  A.  363,  19  Am.  St.  Rep.' 213;  Power  v. 
Plrst  Nat.  Bank,  6  Mont.  251,  12  Pac.  597;  Titus  v.  Mechanics' 
Nat.  Bank  of  Trenton,  35  N.  J.  Law,  588 ;  Allen  v.  Merchants'.  Bank 
of  City  of  New  York,  22  Wend.  (N.  Y.)  215,  34  Am.  Dec.  is9 ;  Ayrault 
V.  Pacific  Bank,  47  N.  Y.  575,  7  Am.  Rep.  489;  National  Revere 
Bank  of  Boston  v.  National  Bank  of  Republic  of  New  York,  172 
N.  Y.  102,  64  N.  E.  799;  Commercial  Bank  v.  Red  River  Val.  Nat. 
Bank,  8  N.  D.  382,  79  N.  W.  859 ;  Reeves  v.  State  Bank  of  Ohio,  8 
Ohio  St.  465 ;  State  Nat.  Bank  of  Ft.  Worth  v.  Thomas  Mfg.  Co.,  17 
Tex.  Civ.  App.  214,  42  S.  W.  1016.  See  ''Banks  and  Banking,"  Dec. 
Dig.  (Ketj  .Yo.)  §§  156,  171,  172;   Oent.Dig.  §§  589-546,  597-628. 

89  East  Haddam  Bank  v.  Scovil,  12  Conn.  303;    Waterloo  Milling 


21G  COLLECTIONS  (Ch.  G 

It  is  generally  conceded  that  the  decisive  consideration 
is:  \\'hat  was  the  understanding  of  the  parties  as  to  the  duty 
the  depositary  bank  undertakes  to  perform?  The  nature  of 
this  understanding  is  really  a  question  of  fact.  In  declaring,  on 
the  one  hand,  that  the  undertaking  is  to  collect,  or,  on  the  other 
hand,  that  the  undertaking  is  merely  to  transmit  to  a  suitable 
agent  for  collection,  the  court  lays  down  a  more  or  less  arbitrary 
rule,  based  upon  the  assumed  intention  of  the  parties,  to  which 
it  resorts  because  the  parties  either  have  no  intention  on  the 
point  or  have  failed  to  express  it.  If, "as  intimated  by  the 
Supreme  Court  of  the  United  States,^''  the  question  is  to  be 
determined  "according  to  the  principles  which  will  best  pro- 


Co.  V.  Kuenster,  158  111.  2.59,  41  N.  E.  900,  29  L.  R.  A.  794,  49  Am.  St. 
Rep.  15G ;  Wilson  v.  Carlinville  Nat.  Bank,  1S7  111.  222,  58  N.  E.  250, 
52  L.  R.  A.  632;  Irwin  v.  Reeves  Pulley  Co.,  20  Ind.  App.  101,  48 
N.  E.  601,  50  N.  E.  317;  Guelick  v.  National  State  Bank,  56  Iowa, 
434,  9  N.  W.  328,  41  Am.  Rep.  110;  Second  Nat!  Bank  v.  Merchants' 
Nat.  Bank,  111  Ky.  9.30,  65  S.  W.  4,  55  L.  R.  A.  273,  98  Am.  St. 
Rep.  439 ;  Citizens'  Bank  of  Baltimore  v.  Howell,  8  Md.  530,  63  Am.  Dec. 
714 ;  President,  etc.,  of  Dorchester  &  Milton  Bank  v.  President, 
etc.,  of  New  England  Bank,  1  Cush.  (Mass.)  177 ;  Lord  v.  Hiugham 
Nat.  Bank,  ISO  Mass.  161,  71  N.  E.  312 ;  Third  Nat.  Bank  of  Louis- 
ville v.  Vicksburg  Bank,  61  Miss.  112,  48  Am.  Rep.  78;  Daly  v. 
Bulchers"  &  Drovers'  Bank,  56  Mo.  94,  17  Am.  Rep.  663;  First 
Nat.  Bank  of  Pawnee  City  v.  Sprague,  34  Neb.  318,  51  N.  W.  846,  15 
L.  R.  A.  498,  33  Am.  St.  Rep.  644  (cf.  First  Nat.  Bank  of  Omaha 
V.  First  Nat.  Bank,  55  Neb.  303,  75  N.  W.  843) ;  Mechanics'  Ban^c  , 
V.  Earp,  4  Ra\>ie  (Pa.)  384 ;  Merchants'  Nat.  Bank  v.  Goodman, 
109  Pa.  422,  2  Atl.  687,  58  Am.  Rep.  728;  Fanset  v.  Garden  ^City 
State  Bank,  24  S.  D.  248,  123  N.  W.  686;  Second  Nat.  Bank 
of  Columbia  v.  Cummings,  89  Tenn.  609,  18  S.  W.  115,  24  Am.  St. 
Rep.  618 ;  Givan  v.  Bank  of  Alexandria  (Tei>n.)  52  S.  W.  923.  47  L. 
R.  A.  270 ;  Winchester  Milling  Co.  v.  Bank  of  Winchester,  120  Tenn. 
225,  111  S.  W.  248,  18  L.  R.  A.  (N.  S.)  441 ;  Stacy  v.  Dane  County 
Bank,  12  Wis.  629.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§ 
X5G,  111,  172;   Cent.  Dig.  §§  53f)-o>,6,  597-(U8. 

90  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,  112  U.  S.  276,  5  Sup. 
Ct.  141,  28  L.  Ed.  722.  See  ''Banks  and  Banking,''  Dec.  Dig.  {Keg 
No.)  m  1''0.  171,  172;    Cent.  Dig.  §§  J39-J//6,  597-628. 


§§  55-57)   COLLECTION  BY  CORRESPONDENT  BANK       217 

mote  llic  "Cifarc  of  the  commercial  communit),"  perhaps  the 
rule  adc]  ,.;]  in  that  court,  wliich  docs  not  compel  the  customer 
to  resort  for  a  remedy  to  a  distant  and  unknown  HWnk,  is  to 
be  preferred,  although  in  favor  of  the  other  rule  it  is  to  be 
said  that  its  result  is  to  dispose  of  any  controversy  in  a  single 
action. 

Liability  of  Depositary  and  Collecting  Banks 

'In  jurisdictions  where  the  rule  prevails  that  the  dei)ositary 
bank  is  responsible  for  the  acts  and  defaults  of  the  corre- 
spondent or  collecting  bank,  it  follows  that  if  that  bank  fails 
in  any  of  its  duties  as  a  collecting  agent,  as  by  failing  to  make 
due  presentment  or  to  give  due  notice  of  dishonor,"^  the  cus- 
tomer's right  of  action  is  solely  against  the  depositary  bank. 
And  if  the  money  has  once  been  received  by  the  collecting 
bank,  it  is  the  same  as  if  it  had  been  received  by  the  depositary 
bank,  its  principal,  and  the  latter  is  responsible  to  its  customer 
for  the  amount  collected,  although  the  collecting  bank  fails 
to  remit  or  to  account  to  it.**-  It  follows  that  for  any  such 
default  the  depositary  bank  may  maintain  an  action  against  the 
collecting  bank.^=*     It  does  not  follow,  however,  that  the  col- 

91  Exchange  Nat.  Bank  v.  Third  Nat.  Bank,"  112  U.  S.  276,  5  Sup. 
Ct.  141,  28  L.  Ed.  722;  Montgomery  County  Bank  v.  Albany  City 
Bank,  7  N.  Y.  459;  Commercial  Bank  of  Pennsylvania  v.  Union 
Bank  of  New  York,  11  N.  Y.  203 ;  National  Revere  Bank  of  Boston 
V.  National  Bank  of  Republic  of  New  York,  172  N.  Y.  102,  G4  N. 
E.  799.  See  "Banlcs  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  164-172; 
Cent.  Dig.  §§  571-628. 

9  2  Hyde  v.  First  Nat.  Bank,  Fed.  Cas.  No.  6,970,  7  Biss.  156; 
Kent  V.  Dawson  Bank,  Fed.  Cas.  No.  7,714,  13  Blatchf.  237;  lirown 
V.  People's  Bank  for  Savings  of  St.  Augustine,  59  Fla.  163,  52  South. 
719;  First  Nat.  Bank  of  Girard  v.  Craig.  3  Kan.  App.  166,  42  Pac. 
830 ;  Simpson  v.  Walby,  63  Mich.  439,  30  N.  W.  199 ;  Power  v.  First 
Nat.  Bank,  6  Mont.  251,  12  Pac.  597 ;  St.  Nicholas  Bank  of  New 
York  V.  State  Nat.  Bank,  128  N.  Y.  26,  27  N.  E.  849,  13  L.  R.  A.  241 
(cf.  Indig  V.  Bank.  80  N.  Y.  100).  See  "Banks  and  Banking;'  Dec: 
Dig.  {Key  No.)  §§  165-170;    Cent.  Dig.  §§  571-596. 

93  Merchants'  &  Manufacturers'  Bank  v.  Stafford  Nat.  Bank,  Fed. 
Cas.   No.  9,438;    Commercial   Bank  of  Pennsylvania   v.  Union  Bank 


218  COLLIvCTIONS  (Ch.  G 

lecting  bank  can  retain  the  proceeds  as  against  the  depositor 
or  owner.  He  may  revoke  the  agency  at  any  time,  and  seek 
the  paper  or  its  proceeds  in  the  hands  of  the  correspondent 
bank,  unless  that  bank  has  made  advances  thereon  to  the  for- 
warding bank  on  the  faith  of  the  paper,  or  is  able  to  assert  a 
lien  for  a  general  balance  thereon  against  the  forwarding  bank. 
"This  is  an  equitable  right,  not  necessarily  resting  in  privity 
of  contract  with  the  party  from  whcxn  such  relief  is  sought."  ^* 
And  if  the  collecting  bank  has  in  its  hands  the  proceeds  of 
collection,  when  the  depositary  bank  by  reason  of  its  insolvency 
mav  not  lawfully  receive  the  same,®"  the  customer's  right  of 
recovery  is  directly  against  the  collecting  bank."*' 

On  the  other  hand,  in  jurisdictions  where  the  rule  prevails 
that  the  depositary  bank  undertakes  merely  to  use  due  care  in 
the  selection  of  a  collecting  bank,  it  follows  that  if  such  care 
be  used,  and  the  collecting  bank  fails  in  its  duty  as  a  collect- 
ing agent,  as  by  failing  to  make  due  presentment  or  to  give 

of  New  York,  11  N.  Y.  203;  Commercial  Bank  v.  Ked  River  Val. 
.\'at.  Bank.  8  N.  D.  382.  79  X.  W.  859.  -See  ''Banks  and  Bankincj," 
Dec.  Dig.  (Key  i\'o.)  §§  165-110;    Cent.  Dig.  §§  571-59G. 

9  4  Naser  v.  First  Nat.  Bank  of  the  City  of  New  York,  116  N.  Y. 
492,  22  N.  E.  1077.  And  see  Bank  of  Clarke  Countj-  v.  Oilman,  81 
Hiin.  48G,  30  N.  Y.  Supp.  1111,  1113.  As  to  the  bank's  lieu,  post,  ]). 
222.  .See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  165-170; 
Cent.  Dig.  §§  571-596. 

9  5  Ante,  p.   208. 

9  6  Old  Nat.  Bank  v.  German-American  Nat.  Bank,  155  U.  S.  550, 
15  Sup.  Ct.  221,  39  L.  Ed.  259 ;  First  Nat.  Bank  v.  Bank  of  Monroe 
(C.  C.)  33  Fed.  408;  Fifth  Nat.  Bank  v.  Armstrong  (C.  C.)  40  Fed. 
46;  Importers'  &  Traders'  Nat.  Bank  v.  Peters,  123  N.  Y.  272,  25 
N.  E.  319;  Bank  of  Clarke  County  v.  Oilman,  81  Hun,  486,  30  N. 
Y.  Supp.  1111;  Reeves  v.  State  Bank,  8  Ohio  St.  405.  Cf.  Corn 
I'Lxch.  Bank  v.  Farmers'  Nat.  Bank  of  Lancaster,  Pa.,  118  N.  Y. 
443,  23  N.  E.  923,  7  L.  R.  A.  559.  See,  also.  Manufacturers'  Nat. 
P.ank  V.  Continental  Bank,  148  Mass.  553,  20  N.  E.  193,  2  L.  R,  A. 
099,  12  Am.  St.  Rep.  598;  Boykin  v.  Bank  of  Fayetteville,  118  N. 
C.  560,  24  S.  E.  357.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  A'O.) 
§§  165-170;   Cent.  Dig.  §§  57-596. 


§§  55-57)       COLLECTION    BY    CORRESPONDENT    BANK  219 

due  notice  of  dishonor,®'  or  by  failing  to  remit  or  account  for 
the  proceeds  of  the  collection."**  the  customer's  right  of  action 
is  solely  against  the  collecting  bank.  The  depositaj*^  bank  is, 
of  course,  responsible  if  it  selects  an  improper  agent,  as  the 
drawee  bank,**®  or  if  it  fails  to  exercise  reasonable  diligence 
in  forwarding  the  pai)er  to  the  collecting  bank.^"''  And  it  is 
the  duty,  if  it  fails  to  hear  from  its  correspondent  in  due  course, 
to  make  inquiry  and  to  take  steps  to  protect  its  customer's 
interest,  and  to  notify  him  of  the  fact,  without  unreasonable 
delay. ^°^  Where,  as  often  happens,  the  collecting  bank,  not 
having  a  correspondent  at  the  place  of  collection,  must  forvyard 
the  paper  to  a  correspondent,  which  in  turn  forwards  the 
paper  upon  its  way,  either  to  a  correspondent  for  further 
forwarding  or  directly  to  a  bank  at  the  place  of  collection, 

9  7  Guelick  v.  National  State  Bank,  56  Iowa,  434,  9  N.  W.  328,  41 
Am.  Rep.  110.  See  "Banks  and  Banking,"'  Dec.  Dig.  {Key  Xo.)  §§ 
111,  112;    Cent.  Dig.  §§  591,  628. 

9  8  San  Francisco  Nat.  Bank  v.  American  Nat.  Bank  of  Los  Angeles, 
5  Cal.  App.  408,  90  Pac.  558;  Irwin  v.  Reeves  Pulley  Co.,  20  Ind. 
App.  101,  48  N.  E.  601,  50  N.  E.  317 ;  President,  etc.,  of  Doix-hester  & 
Milton  Bank  v.  President,  etc.,  of  New  England  Bank,  1  Cush. 
(Mass.)  177;  First  Nat.  Bank  of  Pawnee  City  v.  Sprague,  34  Neb. 
318,  51  N.  W.  846,  15  L.  R.  A.  498.  33  Am.  St.  Rep.  644 ;  Merchants' 
Nat.  Bank  v.  Goodman,  109  Pa.  422,  2  Atl.  687,  58  Am.  Rep.  728; 
Fanset  v.  Garden  City  State  Bank,  24  S.  D.  248,  123  N.  W.  686.  See 
'•Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  165-110;  Cent.  Dig. 
§§  511-596. 
'  99  Winchester  Milling  Co.  v.  Bank  of  Winchester,  120  Teun.  22,5, 
111  S.  W.  249,  18  L.  R.  A.  (N.  S.)  441 ;  ante,  p.  195.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §§  165-112;    Cent.  Dig.  §§  511-62S. 

100  Bedell  v.  Harbine  Bank  of  Fairbury,  62  Neb.  339,  86  N.  W. 
1060.  -See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  111,  112; 
Cent.  Dig.  §§  591-628. 

101  Second  Nat.  Bank  v.  Merchants'  Nat.  Bank,  111  Ky.  9.30,  65  S. 
W.  4,  55  L.  R.  A.  273,  98  Am.  St.  Rep.  439.  See,  also.  First  Nat. 
Bank  of  Trinidad  v.  First  Nat.  Bank  of  Denver.  Fed.  Cas.  No. 
4.810,  4  Dill.  490 ;  Shipsey  v.  Bowery  Nat.  Bank,  59  N.  Y.  485.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  111,  112;  Cent.  Dig. 
§§  591-628. 


220  COLLECTIONS  (Ch.  6 

each  successive  bank  is  agent  of  the  ow^ner,  and  the  several 
banks  in  the  chain  of  transmission  are  responsible  only  for  the 
selection  of  proper  agents  and  for  their  own  diligence  and  the 
propriety  of  their  action  in  respect  to  the  collection. ^'^-  In  ac- 
cordance with  the  custom  of  bankers,  the  collecting  bank  is 
authorized  to  remit  the  proceeds  to  the  depositary  bank,  which 
then,  and  not  before,  will  owe  the  amount  to  its  customer ;  but 
its  liability  is  limited  to  the  amount  which  it  receives  by  ac- 
tual payment  ^^^  or  by  proper  credit  from  the  collecting 
bank."* 
Right  of  Set-Off  or  Lien  of  Collecting  Bank  Against  Fonvard- 

ing  Bank 

According  to  banking  usages,  when  the  depositary  or  other 
forwarding  bank  is  indebted  to  its  correspondent,  to  which  it 
has  forwarded  paper  for  collection,  it  is  customary  for  the  col- 
lecting bank,  instead  of  remitting  the  proceeds  of  the  collec- 
tion to  the  forwarding  bank,  to  credit  that  bank  with  the 
amount  of  the  collection,  and  when  credit  has  been  duly  given 
the  collecting  bank  is  discharged  of  its  liability.  In  other  words, 
"in  the  absence  of  directions  to  the  contrary,  the  collecting 
bank  may  pay  it  [the  amount  collected]  to  the  bank  to  which 
it  should  regularly  be  remitted,  by  setting  it  off  against  a  debt 
due  from  that  bank,  and  giving  credit  for  it  in  the  account," 
and  a  payment  so  made  by  a  set-off  and  adjustment  of  accounts 
in  the  usual  way  is  good  against  the  owner  of  the  paper. ^°^    In 

102  Winchsster  Milling  Co.  v.  Bank  of  Winchester,  120  Tenn.  225, 
111  S.  W,  250, 18  L.  H.  A.  (N.  S.)  441.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §§  165-112;    Cent.  Dig.  §§  511-6Z8. 

103  Waterloo  Milling  Co.  v.  Kuen.ster,  158  111.  259,  41  N,  E.  900, 
29  L.  R.  A.  794,  49  Am.  St.  Rep.  15G.  iSee  ''Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §§  165-110;   Cent  Dig.  §§  511-596. 

104  Post,  p.  220. 

105  Freeman's  Nat.  Bank  v.  National  Tube- Works  Co.,  151  Mass. 
41.3,  24  X.  E.  779,  8  L.  R.  A.  42.  21  Am.  St.  Rep.  401.  See,  also. 
Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50,  13  Sup.  Ct.  533. 
37  L  Ed.  3G3.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§ 
165-11(1:    rent.  Dig.  §§  511-596. 


§5  55-57)      COLLECTION    BY    COKUKSrONDENT    BANK  221 

case  of  the  insolvency  of  the  for\var(Hng  bank,  however,  since 
it  could  no  longer  lawfully  receive  payment,  the  collecting  bank 
can  no  longer  discharge  itself  of  liability  in  this  way,  and 
must  account  for  the  proceeds  of  the  collection  fCMhe  cus- 
tomer,^"" unless  the  circumstances  are  such  that  it  can,  as 
against  him,  assert  a  lien  on  the  proceeds.^ **' 

When  the  indorsement  by  the  customer  to  the  depositary 
bank  is  "for  collection,"  the  indorsement  is  constructive  no- 
tice to  every  bank  to  which  the  paper  may  be  forwarded  that 
the  forwarding  bank  is  not  the  owner  of  the  paper,  and  that 
it  is  forwarded  simply  for  collection  on  account  of  the  cus- 
tomer. The  collecting  bank  can  therefore  acquire  no  lien  or 
better  title  to  the  paper  or  to  its  proceeds  than  belonged  to  the 
depositary  bank.^*""  And  its  position  is  the  same  if  it  has  no- 
tice otherwise  derived  than  by  the  form  of  the  indorsement  that 
the  depositary  bank  received  the  paper  simply  for  collection. ^^* 
It  is  true,  as  has  been  explained,  that  ordinarily,  if  the  for- 
warding bank  is  in  its  debt,  the  collecting  bank  may  make  pay- 
ment by  credit  and  set-ofif  to  the  forwarding  bank.  But  if  in 
the  meantime  the  forwarding  bank  has  become  insolvent,  the 

106  Old  Nat.  Bank  v.  German- American  Nat.  Bank,  155  U.  S.  550, 
15  Sup.  Ct.  221.  39  L.  Ed.  259.  .See  cases  cited  post,  note  108.  -See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  166,  161 ;  Cent.  Dig. 
§§  57^-582. 

107  Post,  p.  222. 

108  Commercial  Nat.  Bank  v.  Armstrong,  148  U.  S.  50,  13  Sup.  Ct. 
533,  37  L.  Ed.  363;  Old  Nat.  Bank  v.  German-American  Nat.  Bank, 
155  U.  S.  55G,  15  Sup.  Ct.  221,  39  L.  Ed.  259 ;  First  Nat.  Bank  v.  Bank 
of  Monroe  (C.  C.)  33  Fed.  408;  Peck  v.  First  Nat.  Bank  (C.  C.) 
43  Fed.  357 ;  Cecil  Bank  v.  President,  etc.,  of  Farmers'  Bank  of 
Maryland,  22  Md.  148;  Bank  of  Clarke  County  v.  Gilman,  81  Hun, 
486,  30  N.  Y.  Supp.  1111,  affirmed  152  N.  Y,  634,  46  N.  E.  1145; 
Bank  of  Sherman  v.  Weiss,  67  Tex.  331,  3  S.  W.  299.  And  see  cases 
cited  supra,  note  85.  Sec  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§§  lof).  165-170;    Cent.  Dig.  §§  547-553,  571-596. 

100  Blaine- V.  Bourne,  11  R.  I.  119,  23  Am.  Rep.  429;  ante,  p.  29. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  159,  165-170;  Cent. 
Dig.  §§  5Jt7-553,  571-596. 


222  COLLECTIONS  (Ch.  0 

collecting  bank  can  no  longer  dispose  of  the  proceeds  of  the 
collection  in  this  Tnanner  to  the  prejudice  of  the  rights  of  the 
customer  of  which  it  had  notice,  at  least  if  the  insolvency  is 
disclosed.  ^^^ 

If.  however,  the  indorsement  'to  the  depositary  bank  is 
unrestricted,  and  the  collecting  bank  is  without  notice,  whether 
derived  from  the  indorsement  or  otherwise,  that  the  depositary 
bank  is  not  the  owner  of  the  paper,  the  collecting  bank  .will 
have  a  lien  upon  the  paper,  or  the  proceeds  of  collection,  not 
merelv  for  any  advance  which  it  may  have  made  upon  the 
]iaper,  but  for  any  general  balance  against  the  forwarding  bank, 
if  the  balance  has  been  allowed  to  arise  and  to  remain  on  the 
faith  of  receiving  payments  from  such  collections  pursuant  to 
the  usual  course  of  dealing 'between  the  two  banks. ^^^     And 


110  Old  Xat.  Bank  v.  German- American  Nat.  Bank,  155  U.  S.  55t). 
15  Sup.  Ct.  221,  39  L.  ,Ed.  259.  And  see  cases  cited  supra,  notes 
96,  108.  See  "Banks  and  Banking:'  Dec.  Dig.  {Keij  No.)  §§  166,  161 ; 
Cent.  Dig.  §§  57.'/-5S2,  586. 

111  Bank  of  Metropolis  v.  New  England  Bank.  1  How.  234.  11  L. 
Ed.  115 ;  Id.,  6  How.  212,  12  L.  Ed.  409 ;  Sweeney  t.  Easter,  1  Wall. 
(U.  S.)  166,  17  L.  Ed.  681 ;  Vickery  v.  State  Savings  Ass'n  (C.  C.)  21 
Fed.  773;  Wyman  v.  Colorado  Nat.  Bank,  5  Colo.  30.  40  Am.  Rep. 
133;  American  Exch.  Nat.  Bank  of  Chicago  v.  Theummler.  195  111. 
90,  62  N.  E.  932,  58  L.  R.  A.  51,  88  Am.  St.  Rep.  177 ;  Garrison  v. 
Union  Trust  Co.,  139  Mich.  392,  102  N.  W.  978,  70  L.  R.  A.  615,  111 
Am.  St.  Rep.  407;  Continental  Nat.  Bank  v.  First  Nat.  Bank.  84 
Miss.  103,  36  South.  189;  Milliken  v.  Shopleigh,  36  Mo.  596,  88  Am. 
Dec.  171 ;  Winfield  Nat.  Bank  v.  McWilliams,  9  Okl.  493,  60  Pac.  229  ; 
Carroll  v.  Exchange  Bank,  30  W.  Va.  518,  4  S.  E.  440,  8  Am.  St. 
Rep.  101. 

In  American  Exch.  Nat.  Bank  of  Chicago  v.  Theummler,  supra,  it 
seems  that  the  court  erred  in  holding  that  the  proceeds  must  he 
applied  to  payment  of  the  indebtedness  before  notice  of  the  insol- 
vency of  the  forwarding  bank,  and  also  before  notice  that  that  bank 
received  the  draft  ^s  agent  for  collection  only,  relying  on  Com- 
mercial Nat.  Bank  v.  Armstrong,  148  U.  S.  50,  13  Sup.  Ct.  533,  37  L. 
Ed.  363,  which  was  distinguishable  by  reason  of  the  restrictive  in- 
dorsement to  the  depositary  bank.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Keg  No.)  §§  165-110;   Cent.  Dig.  §§  511-596. 


§§  55-57)       COLLECTION    BY    CORRESPONDENT    BANK  223 

the  rule  has  been  applied  where  the  indorsement  by  the  for- 
warding bank  to  the  collecting  bank  was  "for  collection" ;  the 
question  being,  not  whether  title  is  apparently  transferred  to 
the  collecting  bank,  but  whether  it  has  a  right  to  treat  the  trans- 
mitting bank  as  the  owner.^^-  In  New  York,  and  one  or  two 
other  states, ^^•'  tlie  rule  that  the  collecting  bank  has  a  right  to 
set  off  the  proceeds  against  such  a  general  balance  has  not  been 
approved.  This  has  resulted  from  the  doctrine,  prevailing  in 
New  York,  that  the  holder  of  negotiable  paper  as  collateral  se- 
curity for  an  antecedent  indebtedness  is  not  a  purchaser  for 
value ;  but  the  courts  seem  also  to  have  regarded  an  indorse- 
ment "for  collection"  by  the  forwarding  bank  as  notice  that  that 
bank  was  not  owner  of  the  paper.^'^*  The  Negotiable  Insti-u- 
ments  Law  provides  ^^^  that  "an  antecedent  or  pre-existing  debt 
constitutes  value,"  and  it  has  been  generally  held  thereunder 
that  an  antecedent  debt  constitutes  value^  even  though  the  in- 
strument is  transferred  merely  as  collateral  security  for  the 
debt."°   It  seems  that  the  effect  of  the  Negotiable  Instruments 


ii2Vickery  v.  State  Savings  Bank  (C.  C.)  21  Fed.  773.  See,  also, 
Carroll  v.  Exchange  Bank.  30  W.  Ya.  518,  4  S.  E.  440,  8  Am.  St. 
Rep.  101.  Bnt  see  Josiah  Morris  &  Co.  v.  Alabama  Carbon  Co., 
139  Ala.  620,  3G  South.  704.  See  ''Banks  and  Banking,"  Dec.  Dh/. 
(Key  No.)  §§  165-110;   Cent.  Dig.  §§  571-596. 

113  See  First  Nat.  Bank  of  Clarion  v.  Gregg,  79  Pa.  384;  Hacketr 
V.  Reynolds,  114  Pa.  328,  6  Atl.  689.  Cf.  Nash  v.  Second  Nat.  Bank, 
67  N.  J.  Law,  265,  51  Atl.  727.,  See  ''Banks  and  Bunking,"  Dec.  Dig. 
(Key  No.)  §§  165-110;    Cent.  Dig.  §§  571-506. 

ii^McBride  v.  Farmers'  Bank,  26  N.  Y.  450;  Stark  v.  United 
States  Nat.  Bank,  41  Hun  (N.  Y.)  506;  Dickerson  v.  Wason,  47  N. 
Y.  439,  7  Am.  Rep.^55;Bank  of  America  v.  Waydell,.103  App.  Div.  25, 
92  N.Y.  Supp.  666;ld.,  104App.  Div.  620,  94  N.  Y.  Supp.  135,  affirmed 
187  N.  Y.  115,  79  N.  E.  857.  Cf.  Hutchinson  v.  President  and  Direc- 
tors of  Manhattan  Co.,  150  N.  Y.  250,  44  N.  E.  775.  See  "Banks  and 
Bunking."  Dec.  Dig.  (Key  No.)  §§  165-170;  'Cent.' Dig.  §§  571-596.    , 

115  Negotiable  Instruments  Law,  §  25. 

116  Murchison  Nat.  Bank  v.  Dunn  Oil  Mills  Co.,  150  N.  C,  718,  64 
S.  E.  885.  See  cases  collected  in  Brannan,  Neg.  Inst.  Law,  207. 
The  holding  of  the  lower  courts  of  New  York  has  generally  been 


224  COLLECTIONS  (Ch.  6 

Law  is  to  bring  the  law  of  New  York  into  harmony  with  that 
generally  prevailing  elsewhere.^^^ 

to  the  contrary.    See  "Banks  and  Banlcino,"  Dec.  Dig.  (Key  'No.)  §§ 
165-170;    Cent.  Dig.  §§  511-596. 

117  So  held  in  King  v.  Bowling  Green  Trust  Co.,  145  App.  Div.  398, 
129  X.  Y.  Supp.  977.  But  see  Bank  of  America  v.  Waydell.  103  App. 
Div.  25.  92  N.  Y.  Supp.  GG6 ;  Id.,  104  App.  Div.  620,  94  N.  Y.  Supp. 
135,  atlirnied  187  N.  Y.  115,  79  N.  E.  857.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §§  156,  159;    Cent.  Dig.  §§  539-553. 


g§   68-59)  LOANS   AND   DISCOUNTS  225 


CHAPTER  VII  _^ 

LOANS  AND  DISCOUNTS 

58.  Power  of  Loaning  and  Discounting. 

59.  Restrictions  upon  Power  to  Loan. 

60.  Meaning  of  Discount. 

61.  Rate  of  Interest — Usury — In  GeneraL 

62.  National  Banks. 

63.  Collateral  Security — In  GeneraL 

64.  Bank's  Own  Stock. 

65.  Real  Estate  Mortgage. 

POWER  OF  LOANING  AND  DISCOUNTING 

58.  The  making  of  loans  and  discounts  is  a  primary  function 

of  banking,  and  the  power  to  make  loans  and  dis- 
counts is  usually  expressly  conferred  upon  incor- 
porated banks. 

RESTRICTIONS    UPON    POWER    TO    LOAN 

59.  Restrictions  upon  the  power  to  loan  are  often  imposed 

by  limitation  of  the  an"iount  that  may  be  lent,  or  of 
the  character  of  the  securities  upon  which  money 
may  be  lent,  or  other  respects;  but,  unless  the 
unauthorized  transaction  be  declared  void,  it  is 
generally  held  that  the  evidence  of  debt  or  the  se- 
curity, although  unauthorized,  may  be  enforced, 
and  that  the  only  remedy  is  a  direct  proceeding  by 
the  government  against  the  bank  for  violation  of 
its  charter. 
.  Tiff.Bks.&  B.— 15 


226  LOANS    AND   DISCOUNTS  (Ch,  7 


MEANING  OF  DISCOUNT 

60.  Discount,  or  strictly  bank  discount,  is  a  deduction  of  in- 
terest made  v^^hen  a  bank  loans  money  to  a  borrow- 
er upon  his  negotiable  paper  or  other  evidence  of 
debt  executed  by  him  to  the  bank  and  payable  at  a 
future  day,  or  when  the  bank  advances  money  to 
the  holder  of  negotiable  paper  or  other  evidences 
of  debt  so  payable  which  he  transfers  to  the  bank ; 
the  interest  being  computed  at  an  agreed  rate  upon 
the  amount  promised  in  the  paper  for  the  time  it 
has  to  run,  and  deducted  in  advance.  Discount 
may,  therefore,  be  by  way  of  loan  or  of  purchase. 
By  weight  of  authority,  the  power  to  discount  in- 
cludes the  power  to  discount  by  way  of  purchase ; 
but,  even  where  the  contrary  doctrine  prevails,  it 
is  held  that  upon  a  discount  by  way  of  purchase  the 
evidence  of  debt  may  be  enforced,  although  the  dis- 
count was  unauthorized. 

In  General    ^ 

As  has  been  explained,  the  making  of  advances  by  \vay  of 
loan  and  discount  is  one  of  the  primary  and  essential  func- 
tions of  banking.^  Most  of  the  questions  which  arise  under 
this  chapter  are  not  questions  of  general  commercial  law,  but 
relate  to  the  powers  of,  and  restrictions  imposed  upon,  incor- 
porated banks  in  the  making  of  loans  and  discounts,  and  to  the 
interest  or  rate  of  discount  which  may  be  charged.  Th'ese 
questions,  as  a  rule,  do  not  concern  private  bankers,  although 
the  laws  concerning  usury  sometimes  have  particular  appli- 
cation to  them,  as  well  as  to  incorporated  banks. ^ 

1  Ante,  p.  1.  , 

2  See  In  re  Samuel  Wilde's  Sons  (D.  C.)  133  Fed.  5G2 ;  Perkins 
V.  Smith,  116  N.  Y.  441,  23  N.  E.  21.  See  "Banks  and  Banking," 
Drr.  Dig.  (Key  No.)   §§  176,  177;    Cent.  Dig.  §§  653-655. 


§    60)  MEANING    OF    DISCOUNT  227 

Pozver  to  Loan — Restrictions 

Usually  the  power  of  lending  money  is  among  the  express 
powers  conferred  upon  incorporated  banks. ^  T+if  power  is 
often  restricted  by  limitation  of  the  amount  that  may  be  loaned 
to  officers  *  or  others,®  by  forbidding  loans  to  officers,"  or  by 
designating  the  character  of  the  securities  on  which  money 
may  be  lent.''  Such  restrictions  are  imposed  primarily  for  the 
benefit  of  the  stockholders,  depositors,  and  other  persons  in- 
terested in  the  bank,  and  although  the  particular  transaction 
may  be  unauthorized,  or  even  forbidden,  it  is  generally  held 
that,  unless  it  is  declared  to  be  void,^  the  debt  or  security  may 
be  enforced;  the  remedy,  if  any,  being  a  direct  proceeding 
by  the  state  against  the  bank  for  the  violation  of  its  qjiar- 
ter.*      Illustrations  of  this  are   frequent  under  the   National 


3  See  Detroit  Sav.  Bank  v.  Truesdail,  38  Mich.  430 ;  Bank  of  New- 
Hanover  V.  Williams,  79  N.  C.  129.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  176;    Cent.  Dig.  §  653. 

4  Richmond  Bank  v.  Robinson,  42  Me.  589 ;  Pemigewassett  Bank 
V.  Rogers,  IS  X.  H.  255.  See  "Banlcs  and  Bantcing,"  Dec.  Dig.  {Key 
No.)  §  178;   Cent.  Dig.  §  660. 

5  Murry  Nelson  &  Co.  v.  Leiter,  190  111.  414,  60  N.  E.  851,  83 
Am.  St.  Rep.  142.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§  176;  Cent.  Dig.  §  653. 

6  Fisher  v.  Murdock,  13  Hun  (N.  T.)  48o.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  178;    Cent.  Dig.  §   660. 

7  Post,  p.  246, 

8  President,  etc.,  of  Western  Bank  v.  Mills,  7  Cush.  (Mass.)  539 ; 
Mills  V.  Rice,  6  Gray  (Mass.)  458.  See  "Banks  and  Banking"  Dec. 
Dig.  (Key  No.)  §  178;    Cent.  Dig.  §§  656-666. 

9  Bates  V.  State  Bank,  2  Ala.  451 ;  Savings  Bank  of  San  Diego 
County  V.  Burns,  104  Cal.  473,  38  Pac.  102;  Brittan  v.  Oakland 
Bank  of  Savings,  124  Cal.  282,  57  Pac.  84,  71  Am.  St.  Rep.  58 ;  Bond 
V.  Central  Bank  of  Georgia,  2  Ga.  92 ;  Murry  Nelson  &  Co.  v. 
Leiter,  190  111.  414,  60  N.  E.  851,  83  Am.  St.  Rep.  142;  Richmond 
Bank  v.  Robinson,  42  Me.  589 ;  Fargason  v.  Oxford  Mercantile  Co., 
78  Miss.  65,  27  South.  877;  St.  Joseph  Fire  &  Marine  Ins.  Co.  v. 
Hauck,  71  Mo.  4()5  (cf.  :NrcClintock  v.  Central  Bank  of  Kansas  City, 
120  Mo.  127,  24  S.  W.  1052) ;,  People's  Trust  Co.  v.  Pabst.  113  App. 
Div.  375.  98  N.  Y.  Supp.  1045;    Bank  of  Middlebury  v.  Bingham,  33 


228  LOANS    AND   DISCOUNTS  (Ch.  7 

Bank  Act.^"  Thus  a  violation  of  the  provision  that  the  total 
liabilities  to  a  national  bank  of  any  person  for  money  bor- 
rowed shall  at  no  time  exceed  one-tenth  of  the  amount  of  its 
capital  stock  actually  paid  in  will  not  enable  a  borrower  to 
avoid  payment  of  a  loan.^^  In  construing  this  section  the 
court  said:  "We  do  not  think  it  required  by  public  policy, 
or  that  Congress  intended,  that  an  excess  of  loans  beyond 
the  proportion  specified  should  enable  the  borrower  to  avoid 
payment  of  the  money  actually  received  by  him.  This  would 
be  to  injure  the  interests  of  creditors,  stockholders,  and  all 
who  have  an  interest  in  the  safety  and  prosperity  of  the 
bank:''^^ 
Meaning  of  Discount — Loan  or  Purchase 

"A  discount  by  a  bank  means,  ex  vi  termini,  a  deduction 
or  drawback  made  upon  its  advances  or  loans  of  money,  upon 
negotiable  paper  or  other  evidences  of  debt,  payable  at  a  fu- 
ture day,  which  are  transferred  to  the  bank."  ^^  Discount 
is  thus  "the  difference  between  the  price  and  the  amount  of 
the  debt,  the  evidence  of  which  is  transferred,  and  that  differ- 
ence represents  interest  charged,  being  at  some  rate,  according 

Vt.  621.  See,  also,  Rome  Sav.  Bank  v.  Krug,  102  N.  T.  331,  6  N. 
E.  682;  Dunn  v.  O'Connor,  25  App.  Div.  73,  49  N.  Y.  Supp.  270. 
Contra:  Workingmen's  Banking  Co.  v.  Rautenberg,  103  111.  460, 
42  Am.  Rep.  26.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§§  ne,  nS;    Cent.  Dig.  §§  653-666. 

10  Post,  p.   295. 

11  Union  Gold  Min.  Co.  v.  Rocky  Mountain  Nat.  Bank,  96  U.  S. 
640,  24  L.  Ed.  648;  The  Seattle,  170  Fed.  2S4,  95  C.  C.  A.  480; 
Richeson  v.  National  Bank  of  Mena  (Ark.)  132  S.  W.  913;  Mary- 
land Trust  Co.  V.  National  Mechanics'  Bank,  102  Md.  608,  63  Atl. 
70.  See  "Banks  and  Banking,"  Dec.  Dig.  (Keij  No.)  §  269;  Cent. 
Dig.  §§  lOlJf-1022. 

in  Union  Gold  Min.  Co.  v.  Rocky  Mountain  Nat.  Bank,  96  U.  S. 
640,  24  L.  Ed.  648.  Sec  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
I  269;   Cent.  Dig.  §§  lOl't-1022. 

13  Fleckner  v.  Bank  of  United  States,  8  Wheat.  350,  5  L.  Ed.  631, 
per  Stoi-y,  J.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
177;  Cent.  Dig.  §§  65J,,  655. 


§    60)  MEANING    OF   DISCOUNT  229 

to  which  the  price  paid,  if  invested  until  the  maturity  of  the 
debt,  will  just  produce  its  amount."  ^*  Strictly  speaking, 
therefore,  discount  consists  in  finding  that  sum  which,  if  put 
at  interest  until  the  maturity  of  the  debt  at  the  particular  rate, 
will  then  amount  to  the  face  of  the  debt,  or,  in  other  words, 
in  finding  the  present  worth  of  the  debt  under  the  conditions 
stated.  It  is  to  be  observed,  however,  that  bank  discount, 
as  it  is  practiced,  gives  a  somewhat  different  result  from  dis- 
count in  the  strict  sense  of  the  term,  for  ib  is  customary  to 
calculate  the  interest  upon  the  debt  until  its  maturity  and  to 
deduct  this  interest;  the  proceeds  received  by  the  customer 
being  therefore  a  little  less  than  the  present  worth  of  the  debt, 
the  bank  thus  securing  a  slight  profit  in  addition  to  that  af- 
forded by  true  discount. ^^  The  transaction,  whereby  the  bank 
pays  or  advances  to  the  holder  of  paper  the  amount  of  the 
debt  thereby  evidenced  less  the  amount  of  the  interest  de- 
ducted in  consideration  of  the  transfer  of  the  paper  to  the 
bank  by  the  holder,  is  itself  termed  a  "discount,"  and  the  pa- 
per is  classified  among  the  assets  of  the  bank  under  the  head 
of  "loans  and  discounts." 

In  the  transaction  just  described  the  paper  is  transferred 
by  the  holder  to  the  bank,  which  acquires  his  right  to  receive 
payment  of  the  debt  thereby  secured  from  the  maker,  drawer, 
or  acceptor  as  the  case  may  be.  The  transaction  is  thus  a 
sale,  and  not  a  loan;  for,  even  if  the  transferror  indorses 
the  paper,  his  liability  to  pay  is  only  secondary.^*'  On  the 
other  hand,  the  bank  may  discount  the  customer's  own  paper, 
executed  by  him  to  the  bank,  by  deducting  the  interest  in  ad- 
vance. In  this  case  the  transaction  is  a  loan  by  way  of  dis- 
count ;  the  borrower's  indebtedness  to  the  bank  being  evidenced 

14  National  Bank  of  Gloversville  v.  Johnson,  104  U.  S.  271,  26 
L.  Ed.  742.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  i77; 
Cent.  Dig.  §§  654,  655. 

15  See  Dunbar,  Theory  &  History  of  Banking,  p.  10. 

16  Post,  p.  233. 


230  LOANS    AND   DISCOUNTS  (Ch.  7 

by  the  paper  on  which  he  is  generally  primarily  liable.^''  In 
both  cases,  therefore,  the  bank  discounts  the  paper,  although 
in  the  one  case  it  is  by  way  of  purchase,  and  in  the  other  by 
way  of  loan;  or,  otherwise  stated,  in  the  one  case  it  is  a  pur- 
chase by  way  of  discount,  and  in  the  other  a  loan  by  way  of 
discount.^ ^  It  is  sometimes  loosely  said  that  the  terms  "loans" 
and  "discounts"  are  synonymous ;  ^^  but  such  a  statement 
does  not  bear  analysis,  for  there  may  be  a  loan  without  dis- 
count.*" 

Pozi'er  to  Discount 

It  follows  from  what  has  been  said  that,  if  by  the  law  of 
its  incorporation  a  bank  is  granted  the  powder  of  discounting 
commercial  paper  and  other  evidences  of  indebtedness,  it  has 
the  power  to  discount  commercial  paper,  either  by  way  of 
purchase  or  by  way  of  loan,  subject  only  to  the  provisions  of 
law  in  respect  to  usury.  The  question  has  frequently  arisen 
with  reference  to  national  banks,  which  are  empowered  to 
exercise  "all  such  incidental  powers  as  shall  be  necessary  to 
carry  on  the  business  of  banking;  by  discounting  and  nego- 
tiating promissory  notes,  drafts,  bills  of  exchange,  and  other 
evidences  of  debt,     *     *     *     by  buying  and  selling  exchange, 

17  Eastin  v.  Third  Nat.  Bank  of  Cincinnati,  102  Ky.  64,  42  S.  W. 
1115.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  178;  Cent. 
Dig.  §§  656-666. 

18  See  Danfortli  v.  National  State  Bank  of  Elizabeth,  48  Fed.  271, 
1  C.  C.  A.  62,  17  L.  R.  A.  622 ;  Morris  v.  Third  Nat.  Bank  of  Spring- 
field, 142  Fed.  25,  73  C.  C.  A.  211 ;  Pape  v.  Capitol  Bank  of  Topeka, 
20  Kan.  444,  27  Am.  Rep.  183;  Atlantic  State  Bank  of  City  of 
Brooklyn  v.  Savery,  82  N.  Y.  291 ;  Niagara  County  Bank  v.  Baker, 
15  Ohio  St.  68.  "See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§  nS;    Cent.  Dig.  §§  656-666. 

19  See  National  Bank  of  Gloversville  v.  Johnson,  104  U.  S.  271, 
26  L.  Ed.  742.  Sec  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§ 
116-118;    Cent.  Dig.  §§  653-666. 

2  0  See  Planters'  &  Merchants'  Bank  v.  Goetter,  108  Ala.  408,  19 
South.  54.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  116- 
118;    Cent.   Dig.   §§  653-666. 


g    60)  MEANING   OF    DISCOUNT  231 

coin  and  bullion;  by  loaning  money  on  personal  security,"-' 
etc.  Under  this  section  some  cases  have  held  that  a  national 
bank  is  not  authorized  to  purchase  negotiable  paper  or  to 
acquire  any  title  to  such  paper  by  purchase.--  And  the  same 
holding  has  been  made  by  some  courts  with  respect  to  state 
banks  under  similar  statutory  provisions. ^^  These  cases  ap- 
pear to  rest  upon  the  mistaken  view  that  a  discount  can  arise 
only  by  way  of  loan,  from  which  it  is  argued  that  if  the 
banks  had  the  power  to  purchase  negotiable  paper  they  could 
evade  the  restrictions  upon  the  rate  of  interest  allowed  to 
be  taken  upon  loans,  being  at  liberty  to  decline  making  loans 
to  their  customers  upon  their  own  paper,  and  afterwards  to 
buy  up  the  very  paper,  which  had  been  offered  for  discount 
and  refused,  at  such  price  as  the  banks  might  choose  to  give. 
By  weight  of  authority,  however,  under  the  power  to  discount 
a  national  bank  may  acquire  commercial  paper  by  purchase 
as  well  as  by  loan.^*  And  the  same  holding  has  been  made  by 
many    courts    under    similar    provisions    applicable    to    state 

21  Rev.  St.  §  5136  (U.  S.  Comp.  St.  1901,  p.  3455). 

2  2  First  Nat.  Bank  of  Rochester  v.  Pierson,  24  Minn.  144,  31 
Am.  Rep.  341  (holding  that  the  purchase  of  a  note,  where  no  loan 
is  intended,  is  not  within  the  power  of  a  national  bank,  and  that 
it  did  not  acquire  title  and  could  not  recover  thereon) ;  Lazear  v. 
National  Union  Bank  of  Maryland,  52  Md.  78,  36  Am.  Rep.  355 
(holding,  by  a  divided  court,  that  a  national  bank  has  no  power 
to  purchase  negotiable  paper  except  from  surplus).  See  Merchants' 
Nat.  Bank  v.  Hanson,  33  Minn.  40,  21  N.  W.  &49,  53  Am.  Rep.  5 
(overruling  First  Nat.  Bank  of  Rochester  v.  Pierson,  supra,  so  far 
as  it  holds  that  a  plea  of  ultra  vires  can  be  interposed  to  the  bank's 
recovery).  See  "Banks  and  Banking,"  Dec.  Diy.  {Key  A"o.)  §  26i); 
Cent.  Dig.  §§  101.^1022. 

2  3  Farmers'  &  Mechanics'  Bank  v.  Baldwin,  23  Minn.  198,  23  Am. 
Rep.  683.  Cf.  Becker's  Investment  Agency  v.  Rea,  63  Minn.  459, 
65  N.  W.  928.  See  "Banks  and  Ranking"  Dec.  Dig.  {Key  A'o.)  § 
111;    Cent.  Dig.  §§  65 h,  655. 

2  4  Danforth  v.  National  State  Bank  of  Elizabeth,  48  Fed.  271,  1 
C.  C.  A.  62,  17  L.  R.  A.  622 ;  Morris  v.  Third  Nat.  Bank  of  Spring- 
field, 142  Fed.  25,  7a  C.  C.  A.  211 ;  First  Nat.  Bank  of  Greenville 
V.  Sherburne,  14  111.  App.  506:    Nicholson  v.  National  Bank  of  New 


232  LOANS    AND   DISCOUNTS  (Cll.  7 

banks.''  It  does  not  follow  from  this  that  the  bank  can  thus 
evade  the  limitations  as  to  the  rate  of  interest.  There  is 
"nothing  in  the  act  of  Congress,  nor  in  reason,  why  a  borrower 
may  not  obtain  the  discount  by  a  bank  of  the  existing  notes 
and  bills  of  others  of  which  he  is  the  holder,  as  well  as  of  his 
own  paper  made  directly  to  the  bank.  It  is  true  that,  as  be- 
tween natural  persons,  the  purchase  of  such  paper,  when  made 
in  good  faith,  and  not  as  a  disguise  for  a  loan,  is  not  subject 

Castle,  92  Ky.  251,  17  S.  W.  627,  16  L.  K.  A.  223;  Newport  Nat. 
Bank  v.  Board  of  Education  of  Newport,  114  Ky.  87,  70  S.  W.  1S6 
(has  power  to  purchase  bonds  issued  by  the  board  of  education  of 
a  city) ;  First  Nat.  Bank  of  Rochester  v.  Harris,  108  Mass.  514 
(may  purchase  checks) ;  Smith  v.  Exchange  Bank  of  Pittsburg,  26 
Ohio  St.  141.  See,  also.  National  Pembertou  Bank  v.  Porter,  125 
Mass.  333,  28  Am.  Rep.  235 ;  Prescott  Nat.  Bank  of  Lowell  v.  Butler, 
157  Mass.  548,  32  N.  E.  909 ;  Schofield  v.  State  Nat.  Bank,  97  Fed. 
282,  38  C.  C.  A.  179. 

Cf.  Rev.  St.  §  5200  fU.  S.  Comp.  St.  1901,  p.  3494),  as  amended  by 
Act  June  22,  1906,  c.  351G,  34  Stat.  451  (U.  S.  Comp.  St.  Supp.  1909, 
p.  1.331),  limiting  the  liabilities  of  persons  to  national  banks  for 
money  borrowed,  and  providing  that  "the  discount  of  commercial 
or  business  paper  actually  owned  by  the  person  negotiating  the 
same  shall  not  be  considered  as  money  borrowed." 

"The  purchase  of  negotiable  paper  by  a  bank  is  as  clearly  within 
its  legitimate  powers,  as  is  the  collection  of  such  paper  by  the 
bank."  Taft  v.  Quinsigamond  Nat.  Bank,  172  Mass.  363,  52  N. 
E.   387. 

It  is  within  the  power  of  a  national  bank  to  buy  a  draft  drawn 
in  its  favor  by  a  seller  upon  a  buyer,  accompanied  by  the  bill  of 
lading.  Union  Nat.  Bank  v.  Rowan,  23  S.  C.  339,  55  Am.  Rep.  26. 
;S'ee  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  269,  271;  Cent. 
Dig.  §§  725-737,  978,  lOlJf-1022. 

25  Pape  V.  Capitol  Bank  of  Topeka,  20  Kan.  444,  27  Am.  Rep.  183; 
Atlantic  State  Bank  of  City  of  Brooklyn  v.  Savery,  82  N.  Y.  291; 
Neilsville  Bank  v.  Tuthill,  4  Dak.  295,  30  N.  W.  154.  See,  also, 
Salmon  Falls  Bank  v.  Leyser,  110  Mo.  51,  22  S.  W.  504  (holding 
that  a  bank  engaged  in  the  general  banking  business  has,  in  the 
absence  of  restriction,  power  to  buy  notes  .outright).  See  "Bajiks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §§  177,  178,  194;  Cent.  Dig.  §§ 
6o.'t-6GG,  725. 


§    60)  IMEAMNG    or    DISCOUNT  233 

to  the  usury  laws;  but  it  is  otherwise  as  to  a  bank."  ^'  Un- 
der the  National  Bank  Act  the  limitation  upon  the  rate  of  in- 
terest expressly  includes  discounts  as  well  as  loarr?:*''^ 

A  few  cases  have  drawn  a  distinction  between  purchases 
v.'here  the  holder  of  the  i)aper  indorses  it  generally  (thereby 
becoming  liable  on  the  p^pcr),  and  purchases  where  the  holder 
indorses  without  recourse,  or  transfers  paper  payable  to  bearer 
by  mere  delivery,  or  transfers  paper  payable  to  order  by  mere 
assij^ment ;  the  courts  declaring  the  transaction  in  the  one 
case  to  be  a  loan,  on  the  ground  that  the  transferror  is  by  his 
indorsement  liable  for  payment,  and  in  the  other  case  to  be 
a  mere  purchase  on  the  ground  that  he  is  not  so  liable. ^^  Upon 
principle,  however,  as  well  as  by  weight  of  authority,  the  in- 
dorsement of  paper,  though  by  way  of  discount,  is  not  a  loan, 
but  a  sale ;  and  a  purchase  by  a  national  bank  by  way  of  dis- 
count, whether  or  not  the  paper  be  generally  indorsed,  is 
authorized  because  it  falls  within  its  power  of  discounting.^^ 

2G  Smith  V.  Exchange  Bank  of  Pittsburg,  26  Ohio  St.  141.  Sec 
"BanJc!^  and  Banldng,"  Dec.  Dig.  {Key  Xo.)  §  181;  Cent.  Dig.  §§ 
68G-700. 

27  Rev.  St.  §  5197  (U.  S.  Comp.  St.  1901,  p.  3493). 

"Whether  loans  and  discounts  are  identical,  in  the  sense  of  sec- 
tion 5197;  or  not,  is  quite  immaterial,  for  both  are  expressly  made 
subject  to  the  same  rate  of  interest.  And  unquestionably  the  trans- 
fer of  the  notes,  *  *  *  if  not  a  loan,  was  a  discount."  Na- 
tional Bank  of  Gloversville  v.  Johnson,  104  U.  S.  271,  26  L.  Ed. 
742.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  269;  Cent. 
Dig.  §§  1014-1022. 

28  Nicholson  v.  National  Bank  of  New  Castle,  92  Ky.  2.51,  17  S. 
W.  627,  16  L.  R.  A.  223.  See,  also,  First  Nat.  Bank  of  Greenville 
V.  Sherburne.  14  111.  App.  .566;  First  Nat.  Bank  of  Rochester  v. 
Pierson,  24  Minn.  140,  31  Am.  Rep.  341.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §§  269,  271;  Cent.  Dig.  §§  725-737,  978,  lOU- 
1022. 

2  0Danforth  v.  National  State  Bank  of  Elizabeth,  48  Fed.  271,  1 
C.  C.  A.  62,  17  L.  R.  A.  622.  See  minority  opinion  in  Lazear  v. 
National  Union  Bank  of  Maryland,  52  Md.  7S,  36  Am.  Rep.  355. 
Bee  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  269,  271;  Cent. 
Dig.  §§  725-737,  978,  101-',-1022. 


234  LOANS    AND   DISCOUNTS  (Ch.  7 

Even  were  the  purchase  of  negotiable  paper  by  a  national 
bank  ultra  vires,  the  violation  could  be  availed  of  only  in  pro- 
ceedings against  the  bank  in  the  interest  of  the  public  to  de- 
prive it  of  its  charter,  and  the  maker  or  indorser  cannot  de- 
fend on  that  ground  in  an  action  by  the  bank.^**  And  so  of 
state  banks  under  similar  provisions  of  statute. ^^ 
Rights  and  Liabilities  of  Bank  as  to  Paper  Discounted 

A  bank  may,  of  course,  retain  discounted  paper  in  its  hands, 
6r  make  any  other  disposition  of  it,^^  as  by  transferring  or 
rediscounting  it.^^  Like  any  other  holder  of  negotiable  pa- 
per, the  bank,  if  it  takes  in  good  faith  and  for  value  and 
without  notice,  is  entitled  to  the  privileges  of  a  holder  in 
due  course,  and  the  same  rules  in  respect  to  notice  apply  to 
it  as  to  other  holders.^*  Being  a  purchaser,  and  not  a  mere 
agent  for  collection,  the  bank  may  hold  the  custom.er  as  in- 
dorser, although  it  fails  upon  dishonor  of  the  paper  to  charge 

30  Black  V.  First  Nat.  Bank,  96  Md.  399,  54  Atl.  S8;  Prescott 
Nat.  Bank  of  Lowell  v.  Butler,  157  Mass.  548,  32  N.  E.  909;  Mer- 
chants' Nat.  Bank  v.  Hanson,  33  Minn.  40,  21  N.  W.  849,  53  Am. 
Rep.  5.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  101,  261; 
Cent.  Dig.  §§  257,  238,  991 

31  Neilsville  Bank  v.  Tuthill,  4  Dak.  295,  30  N.  W.  154.  Bee  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §§  101,  178;  Cent.  Dig.  §§  237,  238, 
656-666. 

32  Farmers'  &  Mechanics'  Bank  v.  Parker,  37  N.  Y.  148.'  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  183;  Cent.  Dig.  §§  fOl- 
105. 

33  Planter's  Bank  v.  Sharp,  6  How.  301,  12  L.  Ed.  447 ;  United 
States  Nat.  Bank  v.  First  Nat.  Bank,  79  Fed.  296,  24  C.  C.  A.  597 ; 
Auten  V.  United  States  Nat.  Bank,  174  U.  S.  125,  19  Sup.  Ct.  628,  43 
L.  Ed.  920 ;  Davenport  v.  Stone,  104  Mich.  521,  02  N.  W.  722,  53  Am. 
St.  Rep.  467 ;  Marvine  v.  Hymers,  12  N.  Y.  223.  But  see  Mclntyre 
V.  Ingraham,  35  Miss.  25.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  183;    Cent.  Dig.  §§  701-705. 

3  4  Auten  V.  United  States  Nat.  Bank,  174  U.  S.  125,  19  Sup.  Ct. 
628,  43  L.  Ed.  920;  Leinoine  v.  Bank  of  North  America,  Fed.  Cas. 
No;  8,240,  3  Dill.  44;  Warren  Deposit  Bank  v.  Younglove,  112  Ky. 
767,  66  S.  W.  749.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
183;    Cent.  Dig.  §§  701-705. 


§§    61-62)  BATE   OF   INTEREST — USURY  235 

Other  indorsers.'"*'  Like  any  other  person  who  negotiates  a 
negotiable  instrument,  one  who  procures  such  paper  to  be  dis- 
counted w^arrants  the  genuineness  of  prior  sign^Jures.^°  If 
the  holder  procures  the  (hscount  of  j^aper  by  false  representa- 
tions as  to  the  solvency  of  the  maker,  the  bank  may  rescind 
the  discount  and  charge  back  the  credit.^ ^ 


RATE  OF  INTEREST— USURY 

61.  IN   GENERAL — Unless  a  different  rate  is   provided 

for  banks,  they  are  subject  to  the  general  laws  of 
the  state  in  which  they  are  incorporated  or  do 
business,  fixing  the  rate  of  interest  that  may  be 
charged  for  the  loan  of  money  and  prescribing 
penalties  for  usury. 

62.  NATIONAL  BANKS— A  national  bank  may  charge  on 

loans  and  discounts  interest  at  the  rate  allowed  by 
the  laws  of  the  state  where  the  bank  is  located; 
but  if  a  higher  rate  is  there  allowed  to  banks  of  is- 
sue, that  rate  may  be  charged,  and  if  no  rate  is 
there  fixed,  the  bank  may  charge  a  rate  not  ex- 
ceeding 7  per  cent.  Knowingly  charging  in  excess 
of  the  rate  allowed  works  a  forfeiture  of  the  en- 
tire interest;  and  if  greater  interest  has  been  ac- 
tually paid,  the  person  who  paid  it  may  recover 
back  twice  the  amount  of  the  interest  paid. 

8  5  Lake  v.  Artisans'  Bank,  17  Abb.  Prac.  (N.  Y.)  232.  See  "Banks 
and  Banlini/,"  Dec.  Dig.  {Key.  No.)  §  183;   Cent.  Dig.  §§  701-705. 

3  6  President,  etc.,  of  Cabot  Bank  v.  Morton,  4  Gray  (Mass.)  156. 
See,  also,  State  Bank  v.  Fearing,  IG  Pick.  (Mass.)  53-3,  28  Am.  Dec. 
2G5.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No^)  §  183;  Cent. 
Dig.  §§  701-105. 

3  7  Bank  of  Antigo  v.  Union  Trust  Co.,  50  111.  App.  434;  Kling 
V.  Irving  Nat.  Bank.  21  App.  Div.  373,  47  N.  Y.  Supp.  528;  'piatow 
V.  Jefferson  Bank,  135  App.  Div.  24,  119  N.  Y.  Supp.  860    See  "Banks 


236 


LOANS    AND   DISCOUNTS  (Ch.  7 


IJmitation  as  to  Rate  in  General 

In  most  states  there  are  usury  laws  prescribing  the  rate  of 
interest  that  may  lawfully  be  charged  for  the  loan  or  for- 
bearance of  money.  These  laws  apply  to  loans  by  banks  as  well 
as  to  others,  unless  the  rate  which  may  be  charged  by  banks  is 
otherwise  regulated  by  general  laws  or  by  charter.^^  Usury 
laws,  so  far,  at  least,  as  they  are  of  general  application,  do  not 
as  a  rule  apply  to  the  purchase  of  negotiable  paper  at  a  dis- 
count greater  than  the  legal  rate  of  interest ;  the  transaction 
being  a  sale,  and  not  a  loan.'"  Laws  which  provide  the  rate 
of  interest  that  may  lawfully  be  charged  by  banks  ordinarily 
in  terms  cover  discounts  as  well  as  loans.*** 

What  Constitutes  Usury 

If  upon  a  loan  or  discount  more  than  the  lawful  rate  is 
intentionally  reserved,  the  transaction,  whatever  form  is  given 
to  it,  is  usurious.*^  Thus,  where  upon  a  discount  in  lieu  of 
money  the  bank  delivered  its  post  notes,  payable  at  a  future 
day  without  interest,  the  notes  being  at  a  discount  in  the  mar- 

and  Banking,"  Dec.  Dig.  {Key  No.)  §§  183,  186;  Cent.  Dig.  §§  701- 
105,  719. 

3  8  Bank  of  Alexandria  v.  Mandeville,  Fed.  Cas.  No.  850,  1  Cranch, 
C.  C.  552 ;  Lumberman's  Bank  v.  Bearce,  41  Me.  505 ;  Ritenour  v. 
Harrison,  57  Mo.  502;  Creed  v.  Commercial  Bank  of  Cincinnati, 
11  Ohio,  489 ;  Stribbling  v.  Bank  of  Valley,  26  Va.  132 ;  Rock  River 
Bank  v.  Sherwood,  10  Wis.  230,  78  Am.  Dec.  669;  Durkee  v.  City 
Bank  of  Kenosha,  13  Wis.  216. 

Authority  in  a  charter  to  charge  such  rate  as  may  be  agreed 
upon  does  not  authorize  charging  a  rate  unlawful  for  others.  Tish- 
imingo  Sav.  Inst.  v.  Buchanan,  60  Miss.  49G ;  Simonton  v.  Lanier,  71 
N.  C.  498.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  181; 
Cent.  Dig.  §§  686-700. 

3  9  Clark,  Contracts  (2d  Ed.)  271. 

It  seems,  however,  that  such  laws  apply  to  discounts  by  way  of 
purchase  by  banks.  See  Salmon  Falls  Bank  v.  Leyser,  116  Mo.  51, 
22  S.  W.  504 ;  Smith  v.  Exchange  Bank  of  Pittsburg,  26  Ohio  St.  141. 
But  see  Bank  of  Louisiana  v.  Briscoe,  3  La.  Ann.  157.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  181;   Cent.  Dig.  §§  686-700. 

4  0  Post,  p.  241.  *i  Clark,  Contracts  (2d  Ed.)  271. 


§§  61-62)        RATE  OF  INTEREST — USURY  237 

ket,  the  transaction  was  usurious.*-  So,  where  the  bank  took 
a  note  payable  in  coin  for  the  face  amount  of  depreciated  state 
bank  notes  loaned,  wliereby  the  b^nk  obtained  a  gr^er  profit 
than  the  lawful  rate."  There  must,  however,  be  an  inten- 
tion to  charge  the  greater  rate.**  Reserving  a  higher  rate 
under  the  guise  of  a  commission  is  usurious.*^  But  the  bank 
may  deduct  in  addition  the  current  exchange  upon  discount 
of  a  bill  payable  in  another  place.*®  A  bank  may  deduct  in 
advance-  legal  interest  upon  the  amount  evidenced  by  the  pa- 
per ;  in  other  words,  it  may  take  the  customary  bank  discount, 
although  it  actually  receives  thereby  a  rate  slightly  in  excess 
of  the  legal  rate  of  interest,  the  custom  being  established  and 
universally  recognized.*'^ 

4  2  Gaither  v.  Farmers'  &  M.  Bank,  Use  of  Corcorran,  1  Pet.  44,  7 
L.  Ed.  43. 

Otherwise  where  it  delivers  its  bank  bills,  although  they  are  at 
a  discount.  Maury  v.  Ingraham,  28  Miss.  171.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  181;   Cent.  Dig.  §§  686-700. 

4  3  Bank  of  United  States  v.  Owens,  2  Pet.  527,  7  L.  Ed.  508.  See, 
also.  Bank  of  State  of  North  Carolina  v.  Ford,  27  N.  C.  692.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  181;  Cent.  Dig.  §§  686- 
100. 

44  Bank  of  United  States  v.  Waggener,  9  Pet.  378,  9  L.  Ed.  163; 
Timberlake  v.  First  Nat.  Bank  (C.  C.)  43  Fed.  231.  Otherwise  un- 
der some  statutes.  Carolina  Sav.  Bank  v.  Parrott,  30  S.  C.  61,  8  S. 
E.  199.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  181;  Cent. 
Dig.  §§  686-700. 

4  5  Union  Nat.  Bank  of  Chicago  v.  Louisville,  N.  A.  &  C.  Ry.  Co.. 
145  111.  20S,  34  N.  E.  135 ;  Olmstead  v.  New  England  Mortg.  Sec.  Co., 
11  Neb.  487,  9  N.  W.  650.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  181;    Cent.  Dig.  §§  686-100. 

4  6  President,  etc.,  of  Portland  Bank  v.  Storer,  7  Mass.  433;  Farm- 
ers' Bank  v.  Garten,  34  Mo.  119;  Marvine  v.  Hymers,  12  N.  Y. 
223;  International  Bank  v.  Bradley,  19  N.  Y.  245;  Central  Bank  of 
Wisconsin  v.  St.  John,  17  Wis.  157.  See,  also,  rarmer.s'  &  Mechan- 
ics' Bank  v.  Parker,  37  N.  Y.  148;  post,  p.  242.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  181;   Cent.  Dig.  §§  686-100. 

47  Fowler  v.  Equitable  Trust  Co.,  141  U.  S.  384,  12  Sup.  Ct.  1,  35  L. 
Ed.  786;    Bank   of  Alexandria  v.   Mandeville,   Fed.   Cas.   No.  850,   1 


238  LOANS    AND   DISCOUNTS  (Ch.  7 

Effect  of  Usury 

The  effect  of  usury  differs  under  different  statutes.  By 
some  statutes  or  charters  the  contract  on  which  the  usury  is 
charged  is  void.*®  In  such  case  the  usury  defeats  an  action 
upon  paper  discounted,  even  against  a  holder  in  due  course, 
unless  an  exception  is  made  by  the  statute  in  his  favor.  Un- 
•der  other  statutes  a  usurious  contract  is  not  void,  but  the 
entire  interest  is  forfeited.*''  Such  is  the  provision  of  the  Na- 
tional Bank  Act.°"  Under  other  statutes  only  the  excess  of 
the  interest  charged  is  forfeited,  and  the  legal  amount  is  nev- 
ertheless recoverable.^^ 

Where  a  bank  makes  a  loan  at  a  rate  prohibited  by  its  char- 
ter or  the  law  under  which  it  is  incorporated,  it  cannot  recover 
in  the  courts  of  that  state  more  than  the  lawful  rate,  although 
the  contract  was  made  in  another  state  where  the  higher  rate 
was  authorized ;  ^^  but  in  cases  where  action  has  been  brought 

( 'ranch.  C.  C.  5-52 ;  Newell  v.  National  Bank  of  Somerset,  12  Bush 
(Ky.)  57 ;  Warren  Deposit  Bank  v.  Robinson's  Adm'rs  (Ky.)  35 
S.  W.  275;  President,  etc.,  of  Maine  Bank  v.  Butts,  9  Mass.  49; 
President,  etc.,  of  Agricultural  Bank  v.  Bissell,  12  Pick.  (Mass.) 
5S6.  Cf.  Branch  Bank  at  Mobile  x.  Strother,  15  Ala.  51.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  181;   Cent.  Dig.  §§  686-700. 

4  8  See  Bank  of  United  States  v.  Owens,  2  Pet.  537,  7  L.  Ed.  508-; 
Youuglilood  V.  Binuingham  Trust  &  Sav.  Co.,  95  Ala.  521,  12  South. 
579,  20  L.  R.  A.  -58,  36  Am.  St.  Rep.  245 ;  Seneca  County  Bank  v. 
Lamb,  26  Barb.  (N.  Y.)  595 ;  Miami  Exporting  Co.  v.  Clark,  13  Ohio, 
1.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  181;  Cent.  Dig. 
§§  686-100.  • 

4  8  See  President,  etc.,  of  Planters'  Bank  of  Mississippi  v.  Sharp,  4 
Smedes  &  M.  (Miss.)  75,  43  Am.  Dec.  470.  See  "Banks  and  Banking,^' 
Dec.  Dig.  {Key  No.)  §  181;    Cent.  Dig.  §§  686-100. 

5  0  Post,  p.  239. 

51  See  McLean  v.  LaFayette  Bank,  Fed.  Cas.  No.  S,8SS,  3  Mc- 
Lean, 587;  Vefizie  Bank  v.  Paulk,  40  Me.  109;  Chafin  v.  Lincoln 
Sav.  Bank,  7  Heisk.  (Tenn.)  409.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  181;   Cent.  Dig.  §§  686-100. 

52Ewing  V.  Toledo  Sav.  Bank,  43  Ohio  St.  31,  1  N.  E.  138;  Farm- 
ers' Bank  v.  Burchard,  33  Vt.  346. 

A  note  dated  and  signed  in  Tennessee,  and  payable  in  Chicago, 


§§  61-62)        RATE  OF  INTEREST — USURY  239 

in  the  state  where  tlie  contract  was  made,  it  has  been  held  that 
the  rate  there  allowed  could  be  recovered.'^' 
Interest  Chargeable  by  National  Banks  -*— 

JJy  the  provisions  of  the  National  Bank  Act,  a  national 
bank  may  charge  on  any  loan  or  discount,  or  on  any  note, 
bill  of  exchange,  or  other  evidences  of  debt,  interest  at  the 
rate  allowed  by  the  laws  of  the  state  where  the  bank  is  lo- 
cated, except  that  if  by  the  state  law  a  different  rate  is  lim- 
ited for  banks  of  issue  that  rate  shall  be  allowed  for  national 
banks  in  the  state,  and  if  no  rate  is  fixed  by  the  state  law 
the  bank  may  charge  a  rate  not  exceeding  7  per  cent.,  which 
may  be  taken  in  advance  for  the  time  the  evidence  of  debt 
has  to  run.  Knowingly  charging  a  higher  rate  than  is  al- 
lowed, as  above,  works  a  forfeiture  of  the  entire  interest; 
and  if  the  greater  interest  has  been  paid,  twice  that  amount 
may  be  recovered  back.°^ 

The  above  provisions,  imposing  penalties  upon  national  banks 
for  taking  usury,  supersede  state  laws  upon  the  subject. ^^ 
Therefore,  while  they  provide  that  the  rate  of  interest  charge- 
able is  that  allowed  by  Ihe  state  law,  the  provisions  of  the 

111.,  and  forwarded  by  the  makers  to  the  payees  there,  and  discouut- 
ed  there  by  a  bank,  was  governed^  by  the  laws  of  Illinois  relating  to 
usury.  Buchanan  v.  Drovets'  Nat.  Bank  of  Chicago,  55  Fed.  223, 
5  C.  C.  A.  83.  See  "Banls  and  Banldiuj;'  Dec.  Dig.  {Key  No.)  §  181; 
Cent.  Dig.  §§  G8G-700. 

53  Hitchcock's  Heirs  v.  United  States  Bank  of  Pennsylvania,  7  Ala. 
3S6;  Frazier  v.  Willcox,  4  Rob.  (La.)  517;  Erwin  v.  Lowry,  6  Rob. 
(La.)  28 ;  Knox  v.  Bank  of  United  States,  26  Miss.  655.  -See  "Banks 
and  Banking,"  Dec.  {Key  No.)  §  ISl;   Cent.  Dig.  §§  686-100. 

54  Rev.  St.  U.  S.  §§  5197,  5198  (U.  S.  Comp.  St.  1901,  p.  3493). 

5  5  Farmers'  &  M.  Nat.  Bank  v.  Bearing,  91  U.  S.  29,  23  L.  Ed. 
196:  Davis  v.  Randall,  115  Mass.  547,  15  Am.  Rep.  14G;  Hinter- 
mister  v.  First  Nat.  Bank  of  Chittemango,  64  N.  Y.  212  (First  Na- 
tional Bank  of  Whitehall  v.  Lamb,  50  N.  Y.  9.5,  10  Am.  Rep.  438, 
and  Farmers'  Bank  of  Fayetteville  v.  Hale,  .59  N.  Y.  53,  having 
been  overruled  by  Farmers'  &  M.  Nat.  Bank  v.  Bearing,  supra).  See 
''Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  210;  Cent.  Dig.  §§  102S- 
1045. 


240  LOANS   AND   DISCOUNTS  (Ch.  7 

act  are  exclusive  so  far  as  concerns  the  penalties  of  usury,'*' 
and  the  forfeiture  is  confined  to  the  interest,  although  by  the 
state  law  the  penalty  may  be  forfeiture  of  the  entire  debt.^^ 
The  only  remedies  available  against  a  national  bank  for  usury 
are  those  prescribed  by  the  act.^^  Except  for  the  forfeiture 
of  interest,  the  rights  of  the  bank  against  prior  parties  upon 
paper  discounted  at  a  usurious  rate  are  unimpaired.^' 
Same — What  Rate  may  be  Charged 

A  national  bank  is  permitted,  as  a  rule,  to  charge  interest 
at  the  rate  and  at  no  higher  rate  than  that  fixed  and  allowed 
for  individuals  and  other  banks  by  the  law  of  the  state  where 
the  bank  is  situated. ®°  In  one  respect,  however,  national 
banks  are  upon  a  different  footing  than  state  banks,  for,  if 
the  rate  of  interest  allowed  generally  is  higher  than  that  al- 
lowed to  state  banks  of  issue,  national  banks  are  entitled  to 
the  higher  rate,  since  the  exception,  that  "where  a  different 
rate  is  limited  for  banks  of  issue  organized  under  state  laws 
the  rate  so  limited  shall  be  allowed  for"  national  banks  speaks 
of  "allowance"  to  national  banks  and  of  "limitation"  upon  state 
banks,  but  does  not  declare  that  the  rate  limited  to  the  latter 

5  8  First  Nat.  Bank  of  Columbus  v.  Garlinghouse,  22  Ohio  St.  492, 
10  Am.  Rep.  7.51.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
270;    Cent.  Dig.  §§  1023-1045. 

5T  Farmers'  &  M.  Nat.  Bank  v.  Bearing,  91  U.  S.  29,  23  L.  Ed.  19G. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  270;  Cent.  Dig.  §§ 
1023-10. ',5. 

5  8  Wiley  V.  Starbuck,  44  Ind.  298.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  270;   Cent.  Dig.  §§  1023-10-',5. 

59  First  Nat.  Bank  of  Dalton  v.  McEntire,  112  Ga.  232,  37  S.  E.  381 ; 
Nicholson  v.  Newcastle  Nat.  Bank,  92  Ky.  251,  17  S.  W.  627,  16  L. 
R.  A.  223. 

A  bank  to  whom  a  note  is  indorsed  for  value  is  a  bona  fide  hold- 
er, although  it  takes  usurious  interest.  Gates  v.  First  Nat.  Bank, 
100  U.  S.  239,  25  L.  Ed.  580.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  270;    Cent.  Dig.  §§  102.3-10^5. 

60  Tiffany  v.  National  Bank  of  Missouri,  IS  Wall.  409,  21  L,  Ed. 
SG2 ;  Farmers'  &  M.  Nat.  Bank  v.  Bearing.  91  U.  S.  29,  23  L.  Ed.  19G; 
La  Bow  V.  First  Nat.  Bank,  51  Ohio  St.  234,  37  N.  E.  11. 


§§  61-62)        RATE  OF  INTEREST — USURY  241 

shall  be  the  maximum  rate  allowed  to  the  former,'^  Under 
the  provision  that,  "when  no  rate  is  fixed"  by  the  state  law, 
the  bank  may  charge  a  rate  not  exceeding  7  per  S£Qt.,  a  na- 
tional bank  is  not  limited  to  that  rate  if  the  state  law  permits 
persons  to  contract  at  any  rate  they  may  agree  upon,  since 
the  bank  may  charge  the  rate  "allowed"  by  the  laws  of  the 
state,  and  "fixed"  must  be  construed  to  mean  "allowed."  '^ 

Same — D  isco  un  ts 

The  limitation  upon  the  rate  of  interest  applies  to  discounts 
as  well  as  to  loans  ;^^  and  it  seems  that  the  fact  that  the  pa- 
per is  transferred  by  delivery  or  by  indorsement  without  re- 

Bj'  compounding  Interest  oftener  than  permitted  by  tlie  state  law, 
a  national  bank  charges  higher  interest  than  that  allowed  by  the 
laws  of  the  state,  although  the  compounded  interest  is  less  than  the 
state  law  permits  to  be  charged  directly,  without  compounding.  Citi- 
zens' Nat.  Bank  v.  Donnell,  195  U.  S.  369,  25  Sup.  Ct.  49,  49  L.  Ed. 
238.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  270;  Cent. 
Dig.  §§  1023,  1028. 

«i  Tiffany  v.  National  Bank  of  Missouri,  18  Wall.  409,  21  L.  Ed. 
862. 

Banks  created  by  special  acts,  to  which  the  power  to  issue  cir- 
culating notes  is  not  specifically  granted,  are  not  banks  of  issue. 
First  Nat.  Bank  of  Clarion  y:  Gruber,  87  Pa.  468,  30  Am.  Rep.  378. 

A  national  bank  may  charge  the  rate  allowed  to  state  banks  in- 
corporated by  special  acts.  First  Nat.  Bank  of  Mount  Pleasant  v. 
Duncan,  Fed.  Cas.  No.  4,804 ;  First  Nat.  Bank  of  Mount  Pleasant  v. 
Tinstuian,  Fed.  Cas.  No.  4,805.  But  see  First  Nat.  Bank  of  Clarion 
V.  Gruber,  supra.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
210;   Cent.  Dig.  §§  1023-1045. 

6  2  Daggs  V.  Phoenix  Nat.  Bank,  177  U.  S.  549,  20  Sup.  Ct.  732,  44 
L.  Ed.  882  (where  a  state  law  allowed  parties  to  agree  oh  any  rate, 
and  in  default  of  agreement  to  take  7  per  cent.).  See,  also,  Califor- 
nia Nat.  Bank  of  San  Diego  v.  Ginty,  108  Cal.  148,  41  Pac.  38 ;  Rock- 
well V.  Farmers'  Nat.  Bank,  4  Colo.  App.  5G2,  36  Pac.  905 ;  Guild  v. 
First  Nat.  Bank,  4  S.  D.  566,  57  N.  W.  499 ;  Jefferson  Nat.  Bank  v. 
Bruhn,  64  Tex.  571,  53  Am.  Rep.  771 ;  Wolverton  v.  Exchange  Nat. 
Bank,  11  Wash.  94,  39  Pac.  247.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  270;    Cent.  Dig.  §§  1023-10J,5. 

6  3  National  Bank  of  Gloversville  v.  Johnson,  104  U.  S.  271,  26  L. 
Ed.  742 ;  Johnson  v.  National  Bank  of  Gloversville,  74  N.  Y.  329,  30 
THF.BKS.&  B.— 16 


242  LOANS    AND   DISCOUNTS  (Ch.  7 

course  will  not  take  the  case  out  of  the  statute.'*     Upon  the 
purchase  or  discount  of  a  bill  of  exchange  payable  at  another 
place  the  current  rate  of  exchange  for  sight  drafts  may  be 
charged  in  addition  to  the  interest.^^ 
Same — Forfeiture  of  Interest 

If  the  interest  exceeds  the  lawful  rate,  it  is  forfeited,  and 
only  the  amount  less  the  interest  unlawfully  reserved  can  be 
recovered.^®  Such  forfeiture  includes  interest  occurring  after 
maturity,  as  well  as  interest  included  in  a  note  in  renewal 
of  a  usurious  loan.^^  The  forfeiture  can  be  enforced  only 
in   an  action  to   collect  the  principal,  by  way   of   defense. ^^ 

Am.  Rep.  302;    ante,  p.  236.     See  ''Banks  and  Banking,"  Dec.  D'ni. 
(Key  No.)  §  270;    Cent.  Dig.  §  102r,. 

6  4Danfortb  v.  National  State  Bank  of  Elizabeth,  48  Fed.  '271,  1 
C.  C.  A.  62,  17  L.  R.  A.  622.  But  see  National  Bank  of  Gloversville 
V.  Johnson,  104  U.  S.  271,  26  L.  Ed.  742 ;  ante,  p.  233.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  270;    Cent.  Dig.  §§  1025,  1028. 

6  5  Rev.  St.  U.  S.  §  5197  (U.  S.  Comp.  St.  1901,  p.  3493).  See  Wheel- 
er V.  Union  Nat.  Bank,  96  U.  S.  268,  24  L.  Ed.  833.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  270;    Cent.  Dig.  §  1024. 

6  6  Farmers'  &  M.  Nat.  Bank  v.  Bearing,  91  U.  S.  29,  23  L.  Ed.  196; 
National  Bank  of  Madison  v.  Davis,   Fed.  Cas.  No.  10,038,  8  Biss. . 
100.     See  "Banks  and  Banking,"  Dee.  Dig.  {Key  No.)  §  270;    Cent. 
Dig.  §§  1023-10.',5. 

6  7  Brown  v.  Marion  Nat.  Bank,  109  U.  S.  416,  18  Sup.  Ct.  390,  42 
L.  Ed.  801;  First  Nat.  Bank  v.  Stauffer  (C.  C.)  1  Fed.  187;  Farm- 
ers' &  Mechanics'  Bank  v.  Hoagland  (C.  C.)  7  Fed.  159;  Danforth 
V.  National  State  Bank  of  Elizabeth,  48  Fed.  271,  1  C.  C.  A.  62,  17  L. 
R.  A.  022 ;  First  Nat.  Bank  of  Peterborough  v.  Childs,  133  Mass.  248, 
43  Am.  Rep.  509;  Shunk  v.  First  Nat.  Bank  of  Gallon,  22  Ohio  St. 
508,  10  Am.  Rep.  762.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§  270 ;    Cent.  Dig.  §§  1023-1045. 

.6  8  First  Nat.  Bank  of  Peterborough  v,  Childs,  130  Mass.  519,  39  Am. 
Rep.  474;  Hintermister  v.  First  Nat.  Bank  of  Chittenango,  64  N. 
Y.  212;    Brown  v.  Second  Nat.  Bank  of  Erie.  72  Pa.  209. 

Where  usury  is  pleaded,  the  bank  cannot -avoid  forfeiture  of  the 
entire  interest  by  then  electing  to  remit  the  excessive  interest.  Citi- 
zens' Nat.  Bank  v.  Donnell,  195  U.  S.  369,  25  Sup.  Ct.  49,  49  L.  Ed. 
238.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  270;  Cent. 
Dig.  §§  1023-10'i5. 


§§  61-62)        KATE  OF  INTEREST — USURY  243 

Inasnuich  as  the  forfeiture  is  of  the  entire  interest  which 
the  evidence  of  debt  carries  with  it,  where  paper  has  been 
discounted  by  way  of  purchase  by  the  bank  it  canqpt  recover 
interest  thereon  from  any  one,  even  from  one  who  was  not 
a  party  to  the  usurious  transaction,  as  a  maker  or  acceptor.**^ 
Same — Recovery  of  Interest  Paid 

If  the  greater  rate  of  interest  has  actually  been  paid,  the 
person  by  whom  it  was  paid,  or  his  representatives,  may,  in 
an  action  in  the  nature  of  debt,  recover  twice  the  amount  from 
the  bank  taking  or  receiving  it;  that  js,  twice  the  amount  of 
interest  paid,  and  not  merely  the  excess  over  the  legal  rate.'^" 
The  payment  must  be  an  actual  payment,  and  not  a  further 
promise  to  pay.^^  The  recovery  can  be  had  only  by  action 
in  the  manner  provided  by  the  act.     When  illegal  interest  has 

6  9  Danforth  v.  National  State  Bank  of  Elizabeth,  48  Fed.  271,  1  C. 
C.  A.  62,  17  L.  R.  A.  622;  National  Bank  of  Auburn  v.  Lewis,  75  N. 
Y.  516,  31  Am.  Rep.  484;  Guthrie  v.  Reid.  107  Pa.  251;  Trabue  v. 
Cook  (Tex.  Civ.  App.)  124  S.  W.  45.5.  Contra:  Smith  v.  Exchange 
Bank  of  Pittsburg,  26  Ohio  St.  141;  Importers'  &  Traders'  Nat.  Bank 
V.  Littell.  47  N.  J.  Law,  233.  See  ''Banks  and  Banking;'  Dec.  Diy. 
{Key  No.)  §  21/0;   Cent.  Dig.  §§  1023-10. ',5. 

7  0  First  Nat.  Bank  v.  Watt,  184  U.  S.  151,  22  Sup.  Ct.  457,  46  L. 
Ed.  475;  Hill  v.  National  Bank  (C.  C.)  15  Fed.  432;  First  Nat.  Bank 
of  Hutchinson  v.  Mclnturfe,  3  Kan.  App.  530,  43  Pac.  839 ;  Second 
Nat.  Bank  v.  Fitzpatrick,  111  Ivy.  228,  63  S.  W.  459,  62  L.  R.  A.  599; 
Schuyler  National  Bank  v.  Bollong,  28  Neb.  684,  45  N.  W.  164;  Leb- 
anon Nat.  Bank  v.  Karmany,  9S  Pa.  65.  Contra:  Hintermister  v. 
First  Nat.  Bank  of  Chittehango,  64  N.  Y.  212 ;  Bobo  v.  People's  Nat. 
Bank,  92  Tenn.  444,  22  S.  W.  888.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  270;   Cent.  Dig.  §§  1046-1053. 

71  Brown  v.  Marion  Nat.  Bank,  169  U.  S.  416,  18  Sup.  Ct.  390, 
42  L.  Ed.  801;  First  Nat.  Bank  of  Jacksboro  v.  Lasater,  196  U.  S. 
115,  25  Sup.  Ct.  200,  49  L.  Ed.  408. 

No  recovery  of  twice  the  amount  of  usurious  interest  paid  can  be 
had  on  the  theory  that  because  in  a  decree  of  foreclosure,  in  which 
was  deducted  from  the  sum  sued  for  the  interest  charged  in  excess 
of  the  legal  rate,  was  included  the  remaining  legal  interest,  illegal 
interest  was  paid  by  a  sale  under  foreclosure  under  such  decree. 
Talbot  V.  First  Nat.  Bank,  185  U.  S.  172,  22  Sup.  Ct.  612,  46  L.  Ed. 


i:44  LOANS    AND   DISCOUNTS  (Ch.  7 

been  paid  upon  a  discount  of  paper,  it  cannot  in  an  action 
by  the  bank  on  the  paper  be  applied  by  way  of  set-off  or  pay- 
ment, nor  can  double  the  amount  be  allowed  by  way  of  coun- 
terclaim.'- The  action  must  be  commenced  within  two  years 
from  the  time  the  usurious  transaction  occurred ;  that  is,  from 
the  time  the  usurious  .interest  is  paid,'^  or  judgment  there- 
for is  entered.'*  This  limitation  does  not  apply  to  the  right 
to  set  up  a  forfeiture  of  interest  in  an  action  by  the  bank.' '    In 

857.  -See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  J^o.)  §  270;  Cent. 
Dig.  §§  1046-1053. 

7  2  Bamet  v.  Muncie  Nat.  Bank,  98  U.  S.  555,  25  L.  Ed.  212;  Dries- 
bach  V.  Second  Nat.  Bank,  104  U.  S.  52,  26  L.  Ed.  658;  Stephens 
V.  Monongahela  National  Bank,  111  U.  S.  197,  4  Sup.  Ct.  336,  28  L. 
Ed.  399;  Haseltine  v.  Central  Nat.  Bank,  183  U.  S.  130,  22  Sup. 
Ct.  50,  46  L.  Ed.  117;  First  Nat.  Bank  of  Peterborough  v.  Childs. 
133  Mass.  248,  43  Am.  Rep.  509;  First  Nat.  Bank  of  Clarion  v. 
Gruber,  91  Pa.  377;  National  Bank  of  Fayette  Co.  v.  Dushane,  96 
Pa.  340  (the  contrary  holding  of  earlier  Pennsylvania  cases  having 
been  overruled  by  Barnet  v.  Muncie  Nat.  Bank,  supra). 

A  controversy  concerning  interest  paid  on  a  note  held  by  a  na- 
tional bank,  secured  by  collateral,  arising  in  a  suit  to  foreclose  the 
mortgage,  was  governed  by  the  National  Bank  Act,  although  the  mort- 
gage securing  the  note  was  executed  in  favor  of  the  bank  president. 
Schuyler  Nat.  Bank  v.  Gadsden,  191  U.  S.  451,  24  Sup.  Ct.  129,  48 
L.  Ed.  2.58.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  .370; 
Cent.  Dig.  §§  1023-1053. 

7  3  First  Nat.  Bank  of  Dorchester  v.  Smith,  36  Neb.  199,  54  N.  W. 
2.54;  Stephens  v.  Monongahela  Nat.  Bank,  88  Pa.  157,  32  Am.  Rep. 
438 ;    Stout  v.  Ennis  National  Bank,  69  Tex.  384',  8  S.  W.  808. 

Upon  a  discount,  where  the  net  proceeds,  after  deducting  usurious 
interest,  are  credited  to  the  transferror  of  the  paper,  this  is  pay- 
ment of  interest.  National  Bank  of  Rahway  v.  Carpenter,  52  N.  J. 
Law,  165,  19  Atl.  181.  See,  also,  Bolx)  v.  People's  Nat.  Bank,  92 
Teun.  444,  21  S.  W.  888.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  270;    Ceyit.  Dig.  §§  1023-1053. 

7  4  Duncan  v.  First  Nat.  Bank  of  Mt.  Pleasant,  Fed.  Cas.  No. 
4,135 ;  First  Nat.  Bank  v.  Denson,  115  Ala.  650,  22  South.  518.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  270;  Cent.  Dig.  §§ 
1023-1053. 

7  5  Pickett  v.  Merchants'  Nat.  Bank  of  Memphis,  32  Ark.  346; 
First  Nat.  Bank  of  Peterborough  v.  Childs,  130  Mass.  519,  39  Am. 


§§    61-62)  KATE    OF   INTEREST — USURY  245 

the  absence  of  agreement  to  the  contrary,  any  part  payment 
of  a  usurious  loan  will  be  regarded  as  payment  of  the  prin- 
cipal, and  not  of  the  interest.''*'  An  action  againstjtlie  bank 
may  be  brought  in  the  state  as  well  as  in  the  federal  courts.''^ 
Same — Discount  of  Paper  Void  for  Usury  by  State  Lazv 

A  peculiar  case  is  presented  where  a  state  law  provides  that 
all  usurious  instruments  shall  be  void,  and  a  national  bank 
purchases  such  an  instrument  from  the  holder  at  a  legal  rate 
of  discount.  Such  a  case  is  not  covered  by  any  provision  of 
the  National  Bank  Act,  which  merely  prescribes  penalties 
when  the  bank  knowingly  takes,  receives,  charges,  or  reserves 
on  any  loan  or  discount  made,  or  upon  any  evidence  of  debt, 
a  rate  of  interest  greater  than  by  the  act  allowed.  It  would 
seem,  therefore,  that  the  bank,  even  if  without  notice  of  the 
usurious  inception  of  the  instrument,  like  any  other  purchaser, 
takes  it  as  void  paper.^^  A  different  construction,  however, 
has  been  placed  upon  the  act  by  a  divided  court,  in  New  York, 

Rep.  474.  ISee  ''Banks  and  BanJcing,"  Dec.  Dig.  (Key  No.)  §  270;  Cent. 
Di(j.  §§  1023-1053. 

-'^  Danforth  v.  National  State  Bank  of  Elizabeth,  48  Fed.  271, 1  C.  C. 
A.  02,  17^L.  R.  A.  622  ;  First  Nat.  Bank  of  Newton  v.  Turner,  3  Kan.  App. 
3.52,  42  Pac.  93G ;  Hall  v!  First  Nat.  Bank  of  Fairfield,  30  Neb.  99,  40 
N.  W.  150;  Cadiz  Bank  v.  Slemmons,  34  Ohio  St.  142,  32  Am.  Rep. 
364 ;  McCarthy  v.  First  Nat.  Bank  of  Rapid  City,  23  S.  D.  269,  121 
N.  W.  853,  23  L.  R.  A.  (N.  S.)  335;  Stout  v.  Ennis  Nat.  Bank,  69 
Tex.  384,  8  S.  W.  808.  -See  ''Banks  and  Banking,''  Dec.  Dig.  {Key 
No.)  §  270;    Cent.  Dig.  §§  1023-1053. 

TTClaflin  V.  Houseman,  93  U.  S.  130,  23  L.  Ed.  833;  Pickett  v. 
Merchants'  Nat.  Bank  of  Memphis,  32  Ark.  346;  Ordway  v.  Central 
Nat.  Bank  of  Baltimore,  47  Md.  217,  28  Am.  Rep.  4.55;  Endres  v. 
First  Nat.  Bank,  66  Minn.  257,  68  N.  W.  1092;  Bletz  v.  Colum- 
bia Nat.  Bank,  87  Pa.  87,  30  Am.  Rep.  343;  Dow  v.  Irasburgh  Nat. 
Bank  of  Orleans,  50  Vt.  112,  28  Am.  Rep.  493.  As  to  review  by 
United  States  Supreme  Court,  see  Schuyler  Nat.  Bank. v.  Bollong, 
150  U.  S.  85,  14  Sup.  Ct.  24,  37  L.  Ed.  1008.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  270;   Cent.  Dig.  §§  10-^6-1053. 

7  8  See  Traders'  Nat.  Bank  v.  Chipman,  164  U.  S.  347,  17  Sup. 
Ct.  85,  41  L.  Ed.  461.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  270;   Cent.  Dig.  §§  1023-1053. 


246  LOANS    AND   DISCOUNTS  (Ch.  7 

where  the  law  provides  that  usurious  instruments  shall" be 
void,  but  also  that  state  banks  shall  be  subject  to  the  same 
usury  laws  as  national  banks.  It  was  held  that  such  an  instru- 
ment, when  discounted  by  a  national  bank,  and  consequently 
when  discounted  by  a  state  bank,  at  a  legal  rate,  may  be  en- 
forced against  prior  parties,  if  the  bank  was  without  notice  of 
its  usurious  inception.'^  ^  The  decision  is  based  upon  the  ground 
that  the  National  Bank  Act,  limiting  the  rate  of  interest  na- 
tional banks  may  charge  and  imposing  penalties  for  usury,  su- 
persedes all  state  laws  on  the  subject  of  usury  as  applied  to  na- 
tional banks.^'*  If  the  scope  of  the  act  is  so  broad  as  to  embrace 
even  transactions  wdiere  there  is  no  usury  on  the  part  of  the 
bank,  it  would  logically  follow  that  such  an  instrument  could 
be  enforced  by  the  bank,  if  it  had  notice  of  the  prior  usury ; 
but  it  has  been  held  in  a  later  case  that  if  the  bank  purchases 
with  notice  it  takes  subject  to  the  defense  of  usury.*^ 


COLLATERAL  SECURITY 

63.  IN  GENERAL — Unless  expressly  restricted,  a  bank 
having  power  to  lend  money  may  take  as  collat- 
eral security  for  a  loan  any  property,  personal  or 
real, 

7  9  Schlesiuger  v.  Gilliooly,  189  N.  Y.  1,  81  N.  E.  619.  See,  also, 
Sehlesinger  v.  Kelly,  114  App.  Div.  546,  99  N.  Y.  Supp.  10S3 ;  Slade 
V.  Bennett,  133  App.  Div.  666,  118  N.  Y.  Supp.  278.  See  ''Banks  and 
BanJcing,"  Dec.  Dig.  {Key  No.)  §  181;   Cent.  Dig.  §§  686-700. 

8  0  Ante,  p.  239. 

81  Scblesiiiger  v.  Lehmaier,  191  N.  Y.  69,  83  N.  E.  657,  16  L.  R.  A. 
(N.  S.)  626,  123  'Am.  St.  Rep.  591. 

The  decisions  can  be  justified  and  reconciled  under  Negotiable 
Instruments  Law,  §§  55,  57.  Some  of  tbe  judges  in  both  cases  (Sehles- 
inger V.  Gilhooly,  189  N.  Y.  1,  81  N.  E.  619,  and  Sehlesinger  v.  Leh- 
maier) rest  their  decisions  upon  that  law,  and,  indeed,  it  seems  to 
iiave  controlled  the  decision  of  the  majority  in  Sehlesinger  v.  Leh- 
maier, supra,  See  '-Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  181, 
210;   Cent.  Dig.  §§  686-700,  1023-1053. 


§^    63-65)  COLLATERAL    SECURITY  247 

64.  BANK'S  OWN  STOCK— Banks  are  often  prohibited 

from  making  loans  on  the  security  of  their  own 
stock.  National  banks  are  prohibited  fro«%  making 
loans  or  discounts  on  the  security  of  their  own 
stock,  unless  such  security  be  necessary  to  prevent 
loss  upon  debts  previously  contracted  in  good 
faith;  but  if  this  prohibition  can  be  urged  against 
the  validity  of  such  an  unauthorized  transaction  by 
any  one  except  the  sovereign,  it  cannot  be  done 
after  the  contract  has  been  executed,  and  the  pro- 
ceeds applied  to  payment. 

65.  REAL  ESTATE  MORTGAGE— Banks  are  often  pro- 

hibited from  making  loans  upon  the  security  of  a 
real  estate  mortgage.  National  banks  are  author- 
ized to  take  such  mortgages  only  by  way  of  se- 
curity for  debts  previously  contracted  in  good 
faith ;  but  the  want  of  authority  to  take  a  mort- 
gage for  a  concurrent  loan  or  for  future  advances 
can  be  urged  only  by  the  sovereign  in  a  proceeding 
against  the  bank  for  violation  of  its  charter. 

In  General — Personal  Security 

The  power  to  loan  naturally  carries  with  it  the  power  to 
loan  bn  collateral  security,  and  unless  a  bank  be  prohibited 
so  to  do  it  may  take  as  security  any  property,  personal  *-  or 
real.^^  Sometimes  banks  are  restrained  from  lending  on  par- 
ticular classes  of  securities;  but,  even  when  such  loans  are 
made,  it  is  generally  held  that  the  borrower  cannot  avail  him- 
self of  the  violation  of  law  as  a  defense,  and  that  the  only 

8  2  Deloach  v.  Jones,  18  La.  447  (a  crop  of  cottou) ;  Coniuiercial 
Bank  of  Manchester  v.  Nolan,  7  How.  (Miss.)  508.  See  "Banks  and 
Banlcinp,"  Bee.  Dig.  {Key  No.)  §  179;    Cent.  Dip.  §§  667-68S. 

83  Post,  p.  250.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
179;    Cent.  Dig.  §§  667-683. 


24.8  LOANS    AND   DISCOUNTS  (Ch.  7 

penalty  therefor  is  sucH  as  may  be  imposed  on  the  bank  at  the 
suit  of  the  sovereign.^* 

National  Banks 

Among-  the  powers  conferred  on  national  banks  is  that  of 
"loaning  money  on  personal  security."  ^^  The  words  "personal 
security"  are  used  in  contradistinction  to  real  estate  security, 
and  the  bank  "may  take  a  pledge  of  bonds,  choses  in  action, 
bills  of  lading,  or  other  personal  chattels."  ^* 

Shares  of  Stock  in  Other  Corporations 

It  is  the  general  rule  that  banks,  like  other  corporations,  have 
no  power,  unless  expressly  authorized,  to  purchase  stock  in 
another  corporation;  ^'^  but  a  bank  having  power  to  lend  mon- 
ey may  accept  such  stock  as  security  for  a  loan.^®  Thus,  the 
power  to  buy  and  sell  stocks  is  not  conferred  upon  national 
banks ;  ®®  but,  as  incidental  to  the  power  to  loan  money  on 
personal  security,  a  national  bank  may  accept  stock  of  another 
corporation  as  collateral  security,  and  by  the  enforcement  of 
its  rights  as  pledgee  may  become  the  owner  of  the  collateral, 

84  Allen  V.  Freedman's  Savings  &  Trust  Co.,  14  Fla.  418;  ante, 
pp.  227,  234;  post,  pp.  250,  252.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  179;   Cent.  Dig.  §§  661-683. 

8  5  Rev.  St.  U.  S.  §  5130  (U.  S.  Comp.  St.  1901,  p.  3455).  See  "Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §  269;   Cent.  Dig.  §  1016. 

8  6  Pittsburgh  Locomotive  &  Car  Works  v.  State  Nat.  Bank  qt 
Keokuk,  Fed.  Cas.  No.  11,198  (locomotive).  See,  also,  Third  Nat. 
Bank  of  Baltimore  v.  Boyd,  44  Md.  47,  22  Am,-  Rep.  35  (bonds) ; 
Cleveland  v.  Shoeman,  40  Ohio  St.  176  (warehouse  receipt). 

A  bank  may  take  a  chattel  mortgage  to  secure  a  previous  debt. 
Stafford  v.  First  Nat.  Bank  of  Tama  City,  37  Iowa,  181,  18  Am.  Rep. 
6.  See  "Banks  and  Banking;'  Dec.  Dig.  (.Key  No.)  §  269;  Cent.  Dig. 
§  1016. 

87  Post,  p.  277. 

8  8  Rut  see  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank  of 
Cincinnati,  36  Ohio  St.  350.  38  Am.  Rep.  594.  See  "Banks  and  Bank- 
ing." Dec.  Dig.  [Key  No.)  §  179;   Cent.  Dig.  §§  667-688. 

8  0  Post,  p.  278. 


§§  63-65)  COLLATERAL  SECURITT  249 

as  well  as  be  subject  to  liability  as  other  stockholders.'"  So 
a  national  bank  may  accept  in  good  faith  stock  of  another 
corporation  as  security  for  a  previous  indebtedng^"^ 

Shares  of  Bank's  Oivn  Stock 

Banks  are  often  prohibited  from  making  any  loan  or  dis- 
count on  the  security  of,  as  well  as  from  purchasing,  their  own 
stock."'- 

The  National  Bank  Act  provides  that  no  bank  shall  make 
any  loan  or  discount  on  the  security  of  the  shares  of  its  own 
capital  stock,  nor  be  purchaser  or  holder  of  any  such  shares, 
unless  necessary  to  prevent  loss  upon  a  debt  previously  con- 
tracted in  good  faith,  and  that  stock  so  purchased  or  acquired 
shall  within  six  months  be  sold,  or  in  default  thereof  a  re- 
ceiver may  be  appointed. ^^  Under  the  foregoing  provisions  a 
bank  may  make  a  loan  or  discount  on  the  security  of  its  own 
stock  only  when  necessary  to  prevent  loss  on  debts  previously 
contracted  in  good  faith. ^^     The  placing  by  one  bank  of  its 

0  0  Germania  Nat.  Bank  v.  Case,  99  U.  S.  628,  25  L.  Ed.  448; 
Shoemaker  v.  National  Mechanics'  Bank,  Fed.  Gas.  No.  12,801 ;  Can- 
field  V.  State  Nat.  Bank  of  Minneapolis,  Fed.  Cas.  No.  2,382 ;  West- 
minster Nat.  Bank  v.  New  England  Electrical  Works,  73  N.  H.  465, 
62  Atl.  971,  3  L.  R.  A.  (X.  S.)  551,  111  Am.  St.  Rep.  637.  See,  also, 
California  Bank  v.  Kennedy,  167  U.  S.  362,  366,  17  Sup.  Ct.  831, 
833,  42  L.  Ed.  198.  See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
269;   Cent.  Dig.  §  J 016. 

91  Post,  p.  278. 

9  2  See  Vansands  v.  Middlesex  County  Bank,  26  Conn.  144;  Battey 
V.  Eureka  Bank,  62  Kan.  384,  63  Pac.  437. 

Where  it  was  agreed  between  a  bank  and  defendant  that  he  should 
buy  on  the  market  certain  shares  of  its  stock  for  its  benefit,  the 
bank  to  lend  the  money  on  his  note,  and  to  hold  the  stock  and  re- 
new the  note  till  the  stock  could  be  sold,  the  note  to  be  an  obliga- 
tion, the  agreement  being  in  violation  of  the  statute  was  no  defense 
to  an  action  on  the  note.  St.  Paul  &  M.  Trust  Co.  v.  Jenks,  57  Minn. 
248,  59  N.  W.  299.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
8§  91,  119,  180;  Cent.  Dig.  §§  225,  679,  6S.'/-68.5i^. 

93  Rev.  St.  U.  S.  §  5201  (U.  S.  Comp.  St.  1901,  p.  3494). 

94  First  Nat.  Bank  v.  Lanier,   11  Wall.  369.  20  L.   Ed.   172.     See 


250 


LOANS    AND   DISCOUNTS  (Ch. 


95 


funds  on  permanent  deposit  is  a  loan  within  this  prohibition 
But  if  the  prohibition  against  loans  by  a  bank  upon  the  shares 
of  its  own  stock  can  be  urged  against  the  validity  of  such  a 
transaction  by  any  one  except  the  government,  it  can  be  done 
only  before  the  contract  is  executed,  and  while  the  security  is 
subsisting  in  the  hands  of  the  bank ;  and  when  the  contract 
has  been  executed,  and  the  proceeds'  applied  to  payment  of  the 
debt,  the  courts  will  not  interfere.®® 

Real  Estate  Mortgage 

In  the  absence  of  prohibition  in  its  charter,  a  bank  has  the 
implied  power  to  take  a  mortgage  on  real  estate  to  secure  a 
loan.®^    Sometimes  the  power  is  expressly  granted,^^  and  some- 

-'Banks  and  Banking,"  Dec.  Dig.  {Ketj  'So.)  §§  119,  180;  Cent.  Dig.  §§ 
667-6851/2. 

9  5  First  Nat.  Bank  v.  Lanier,  11  Wall.  369,  20  L.  Ed.  172.  Where 
plaintiff  purchased  shares  and  received  from  the  holder  certificates 
regularly  assigned,  the  certificates  declaring  the  holder  to  be  owner 
and  that  they  were  transferable  on  the  books  only  on  the  surrender 
of  the  certificates,  and  the  bank  refused  to  transfer  the  stock  on  the 
books  on  the  ground  that  the  shares  had  been  pledged  to  it  by  the 
holder  as  security  for  deposits  made  by  it  to  him,  and  had  been  sold 
and  transferred  to  others  under  a  power  from  the  holder  before 
the  bank  had  notice  of  plaintiff's  purchase,  an  action  by  the  pur- 
chaser for  damages  lay,  and.  the  pledge  being  illegal,  the  previous 
transfer  was  no  defense.  First  Nat.  Bank  v.  Lanier,  supra.  -See. 
also,  Bullard  v.  National  Eagle  Bank,  18  Wall.  589,  21  L.  Ed.  92.3. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Keij  No.)  §§  179,  180;  Cent. 
Dig.  §§  667-6S5y2. 

ae  First  Nat.  Bank  v.  Stewart,  107  U.  S.  676,  2  Sup.  Ct.  778,  27 
L.  Ed.  592;  post,  p.  279.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  261;  Cent.  Dig.  §  95.9. 

9  7  Bank  of  Martinez  v.  Hemme  Orchard  &  Land  Co.,  105  Cal.  376, 
38  Pac.  963 ;  Crocker  v.  Whitney,  71  N.  T.  161  (to  secure  anticipated 
liabilities).  See,  also,  Alexander  v.  Brummett  (Tenn.)  42  S.  W.  63. 
•See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  179;  Cent.  Dig.  §§ 
667-672. 

98  Dunn  v.  O'Connor,  25  App.  Div.  73,  49  N.  Y.  Supp.  270;  Mer- 
chants' State  Bank  of  Fargo  v.  Tufts,  14  N.  D.  238.  103  N.  W.  760. 
lie  Am.  St.  Rep.  682  ("by  way  of  security  for  loans  or  for  debts  pre- 
viously contracted") ;  Bennet  v.  Union  Bank,  5  Humph.  (Tenn.)  612. 


§§  63-65)  COLLATERAL  SECURITT  251 

times  it  is  withheld.    Sometimes  the  power  conferred  is  simply 
to  take   mortgages   to   secure   debts    previously    contracted.®® 
Where  a  bank  has  the  power  to  take  a  mortgagej-it  may,  of 
course,  foreclose  and  realize  upon  the  security/"" 
Same — National  Banks 

The  power  of  national  banks  to  hold  and  convey  real  estate 
is  restricted;  but  they  are  expressly  authorized  to  hold  such 
as  shall  be  mortgag-ed  in  g^ood  faith  by  way  of  security  for 
debts  previously  contracted,  and  such  as  they  shall  purchase 
under  mortgages  held  by  them.i"^  A  national  bank  may, 
therefore,  lawfully  take  a  real  estate  mortgage  as  security  for 
a  loan  previously  made,  and,  it  seems,  may  lawfully  take  a' 
mortgage  as  security  for  a  concurrent  loan,  if  the  title  be  not 
thereby  vested  in  the  bank,  as  upon  the  assignment  of  a  note 
Avith  a  deed  of  trust  securing  it;  ^"-  but  the  bank  is  forbidden, 
either  for  a  concurrent  loan  or  for  future  advances,^"-'  to  take 

.S^ee  "Banks  and  Bankinif,"  Dee.  Dig.  {Key  No.)  §  179;  Cent.  Dig.  §§ 
667-672. 

0  9  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370  (holdmg  a 
mortgage  to  secure  a  contemporaneous  loan  valid  under  such  power). 
See  ''Banks  and  Banking;''  Dec.  Dig.  (Key  No.)  §  179;  Cent.  Dig.  §§ 
€'67-672. 

loo  Gage  v.  Sanborn,  106  Mich.  2G9,  64  N.  W.  32.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  179;  Cent.  Dig.  §§  667-683. 

10  1  Rev.  St.  U.  S.  §  5137  (U.  S.  Comp.  St.  1901,  p.  3JI>0)  ;  post, 
p.  281. 

A  state  statute  invalidating  transfers  with  a  view  to  a  preference 
by  an  insolvent  does  not  conflict  with  this  s'ection,  nor  does  it  impair 
any  function  of  national  banks  as  instrumentalities  of  the  federal 
government.  Traders'  Nat.  Bank  v.  Chipmau,  164  U.  S.  347,  17  Sup. 
Ct.  85,  41  L.  Ed.  401.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.) 
§  269;  Cent.  Dig.  §  1016. 

102  Union  Nat.  Bank  v.  Matthews,  98  U.  S..621,  25  L.  Ed.  188.  See 
"Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  2.59,  261,  269;  Cent.  Dig. 
§§  9S0,  992,  1016. 

103  Union  Nat.  Bank  v.  Matthews,  98  U.  S.  621,  25  L.  Ed.  188.  See 
Kansas  Val.  Nat.  Bank  v.  Rowell,  Fed.  Cas.  No.  7,611,  2  Dill.  371. 
.See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  259,  261,  2(f9;  Cent, 
nil.  {%  9S0,  092,  1016. 


252  LOANS    AND   DISCOUNTS  (CIl.  7 

a  mortgage  which  conveys  to  it  the  legal  title  to  real  estate. 
The  effect  of  the  prohibition,  however,  is  not  to  avoid  the 
transaction  between  the  parties,  and  the  bank  may  enforce  the 
mortgage.^"*  The  sovereign  alone  can  object.  "The  impend- 
ing danger  of  a  judgment  of  ouster  and  dissolution,"  the  su- 
preme court  declared,  "was,  we  think,  the  check,  and  none 
other,  contemplated  by  Congress."  ^^^ 

The  bank  may  take  back  a  purchase-money  mortgage  upon 
the  sale  of  land  lawfully  held.^"® 

Bill  of  Lading  Accompanying^  Draft  Discounted 

Where  upon  the  shipment  of  goods  the  seller  takes  a  bill 
of  lading,  and  deals  with  it  so  as  to  secure  the  contract  price, 
by  drawing  on  the  buyer  for  the  amount,  and  obtaining  a  dis- 
count of  the  draft  from  a  bank,  to  which  the  seller  delivers 
the  indorsed  bill  of  lading  attached,  the  bank  acquires  a  spe- 
cial property  in  the  goods  to  secure  its  advances,  and  the 
property  in  the  goods  does  not  pass  to  the  buyer  until  accept- 
ance or  payment  of  the  draft  or  tender  of  the  price.^°^  And 
the  rule  is  the  same  where  the  seller  takes  a  bill  of  lading 

104  Union  Nat.  Bank  v.  Matthews,  98  U.  S.  621,  25  L.  Ed.  188; 
National  Bank  of  Genesee  v.  Whitney,  103  U.  S.  99,  26  L.  Ed.  443 : 
Reynolds  v.  First  Nat.  Bank,  112  U,  S.  40.5,  5  Sup.  Ct.  213,  28  L.  Ed. 
733 ;  Fortier  v.  New  Orleans  Nat.  Bank,  112  U.  S.  439,  5  Sup.  Ct.  234. 
28  L.  Ed.  764.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§ 
259,  261,  269;  Cent.  Dig.  §§  980,  992,  1016. 

lOTG  Union  Nat.  Bank  v.  Matthews,  98  U.  S.  C21,  25  L.  Ed.  188.  Sec 
"Banks  and  Banking,"  Dec.  Dig.  (Key  ^'o.)  §§  259,  261;  Cent.  Dig.  §§ 
980,  992. 

106  New  Orleans  Nat.  Bank  v.  Baynioud,  29  La.  Ann.  3oo,  29  Am. 
Rep.  335;  First  Nat.  Bank  of  Memphis  v.  Kidd,  20  Minn.  234  (Gil. 
212).  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  269;  Cent. 
Dig.  §§  101.',-1022. 

107  Mirabita  v.  Bank,  8  Exch.  Div.  164;  Jenkyns  v.  Brown,  14  Q.  B. 
496,  19  L.  J.  Q.  B.  2SG ;  Dows  v.  National  Exch.  Bank,  91  U.  S.  618, 
23  L.  Ed.  214;  American  Nat.  Bank  v.  Henderson,  123  Ala.  612,  2S 
South.  498,  82  Am.  St.  Rep.  147 ;  Mather  v.  Gordon,  77  Conn.  341,  bV) 
Atl.  424;  Shaffer  v.  Rbynders,  110  Iowa,  472,  89  N.  W.  3099;  Halsey 
V.  Wartien,  25  Kan.  128;  First  Nat.  Bank  of  Cairo  v.  Crocker.  Ill 
Ma.ss.  103;  First  Nat.  Bank  of  Chicago  v.  Bayley,  115  Mass.  228; 


§§    G3-65)  COLLATERAL   SECURITY  253 

making  the  goods  deliverable  to  the  buyer,  and  delivers  it  so 
attached  to  the  bank  which  discounts  the  draft ;  the  bank  ac- 
(juiring  a  .special  property  in  the  goods  to  secir^e  its  ad- 
vances.^'*^  In  some  cases  it  has  been  held  that  a  bank  which 
purchases  a  draft  with  a  bill  of  lading  attached,  making  the 

Forbes  v.  Boston  &  L.  R.  Co.,  133  Mass.  154 ;  Security  Bank  of  Minne- 
sota V.  Luttgen,  29  Minn,  363,  13  N.  W.  151 ;  Bank  of  Rocliester  v. 
Jones,  4  N.  Y.  497,  55  Am.  Dec.  290 ;  Commercial  Bank  of  Keokuk  v. 
Pfeiffer,  108  N.  Y.  242.  15  N.  E.  311 ;  In  re  Non-Magnetic  Watch  Co. 
of  America,  SO  Hun,  190,  34  N.  Y.  Supp.  1017 :  Tliird  Nat.  Bank  of  St. 
Louis  V.  Hays.  119  Tenn.  729,  108  S.  W.  lOGO ;  Nelll  v.  Rogers  Bros. 
Produce  Co.,  41  W.  Va.  37.  23  S.  E.  702.  See,  also,  Walsh,  Boyle  & 
Co.  V.  First  Nat.  Bank  of  Hiawatha,  Kan.,  228  111.  446,  81  N.  E.  1067. 

Advances  for  the  purchase  of  certain  cattle  were  made  by  a  bank, 
on  the  agreement  by  the  parties  to  the  sale  that  the  bank  should 
have  a  lien  therefor  on  the  cattle  until  they  should  be  sold  by  con- 
signees to  whom  they  were  to  be  shipped,  and  that  a  draft  for  the 
amount  should  be  drawn  on  the  consignees  against  the  proceeds  of 
the  sale  by  them.  Such  draft  was  made  and  delivered  to  the  bank, 
with  a  bill  of  lading  for  four  car  loads  of  the  cattle ;  but  no  bill  of 
lading  was  issued  for  the  two  remaining  car  loads,  they  being 
shipped  in  the  name  of  a  third  person  to  enable  him  to  procure  a 
pass  to  accompany  the  bank's  agent  in  charge  of  the  shipment.  The 
consignees,  before  selling  the  cattle,  had  notice  of  the  bank's  ad- 
vances and  of  the  draft  and  bill  of  lading,  and  no  money  was  paid 
nor  any  right  relinquished  by  them  on  account  of  the  shipment. 
Held,  that  the  consignees  could  not  apply  the  proceeds  of  the  sale  to 
a  prior  debt  of  the  consignor  to  them,  as  against  the  bank's  lien, 
which  was  valid  against  them  even  as  to  the  proceeds  of  the  two  car 
loads  not  included  in  the  bill  of  lading.  Means  v.  Bank  of  Ran- 
dall, 140  U.  S.  020,  13  Sup.  Ct.  186,  30  L.^Ed.  1107. 

Where  a  shipper  drew  against  his  consignment  for  sale  upon  the 
consignees,  with  whom  his  account  was  overdrawn,  and  assigned  the 
duplicate  bill  of  lading  to  a  bank,  which  discounted  the  draft,  the 
consignees  who  received  the  property  upon  the  original  bill  had  no 
right  to  apply  the  goods  or  their  proceeds  in  discharge  of  the  ship- 
per's liability  to  themselves  arising  from  other  transactions;  the 
bank  having  acquired  title  to  the  consignment  to  the  extent  of  the 
draft  discounted  on  security  thereof.  First  Nat.  Bank  of  Batavia  v. 
Ege,  109.  N.  Y.  120,  16  N.  E.  317,  4  Am.  St.  Rep.  421.  See,  also, 
Drexel  v.  Pease,  133,N.  Y.  129,  .30  N.  E.  732.  See  "Banks  and  Bank- 
ing," Dec.  Big.  {Key  yo.)  §  1~9;  Cent.  Dig.  §§  616,  678. 

108  Merchants'  Exch.  Bank  v.  McGraw,  .59  Fed.  972,  8  C.  C.  A.  420; 


254  LOANS    AND   DISCOUNTS  (Ch.  7 

goods  deliverable  to  the  order  of  the  consignor,  assumes  the 
obligation  of  the  seller  to  deliver  to  the  drawee  according  to 
the  contract  of  sale  the  goods  represented  by  the  bill  of  lad- 
ing;^"® but  this  doctrine  is  clearly  erroneous.  On  principle, 
the  bank  under  the  assignment  of  the  bill  of  lading  takes  the 
title  of  the  seller  only  as  security,  and  acquires  substantially 
the  interest  of  a  mortgagee,  his  interest  being  discharged  by 
payment  of  the  debt,  and  he  becomes  subject  to  no  liability  to 
the  buyer  which  he  does  not  expressly  assume ;  and  this  view 
is  sustained  by  the  weight  of  authority,  including  courts  by 
which  the  contrary  doctrine  was  formerly  declared. ^^'^  A 
bank  which  in  good  faith  discounts  a  draft  w^ith  a  bill  of  lading 
attached  does  not  warrant  the  genuineness  of  the  latter,  and 
if  the  drawee  pays  the  draft  on  the  faith  of  the  bill  of  lading, 

Morse  v.  Chicago,  R.  I.  &  P.  Ry.  Co.,  73  Iowa,  226,  34  N.  W.  825: 
Emery  v.  Irving  Nat.  Banlc,  2.5  Ohio  St.  360,  18  Am.  Rep.  299; 
Greenwood  Grocery  Co.  v.  Canadian  County  Mill  &  Elevator  Co.,  72 
S.  C.  450.  52  S.  E.  191,  2  L.  R.  A.  (N.  S.)  79,  110  Am.  St.  Rep.  627. 
But  see  Bank  of  Litchfield  v.  Elliott,  S3  Minn.  469,  86  N.  W.  454. 

Whether  one  to  whom  a  bill  of  lading  is  indorsed  as  security  is 
pledgee  or  mortgagee  depends  on  the  intention.  Sewell  v.  Burdick, 
10  L.  R.  App.  Cas.  74. 

It  seems  that  a  bank,  which  makes  advances  and  takes  the  bill  of 
lading  to  its  own  order,  with  authority  to  take  possession  and  dis- 
pose of  thQ.  goods  for  his  security  or  reimbursement,  is  a  mortgagee. 
See  Moors  v.  Kidder,  106  N.  Y.  32,  12  N.  E.  818 ;  Mershon  v.  Wheeler, 
76  Wis.  502,  45  N.  W.  95.  Cf.  Moors  v.  Wyman,  ]-'  ■  Mass.  60,  15 
N.  E.  104 ;  Moors  v.  Drury,  ISO  Mass.  424,  71  N.  E.  810 ;  In  re  New 
Haven  Wire  Co.,  57  Conn.  352,  18  Atl.  266,  5  L.  R.  A.  300.  See 
''Banks  and  Banking,"  Bee.  Dip.  {Key  No.)  §  179;  Cent.  Dig.  §§  676, 
678. 

109  Haas  &  Co.  v.  Citizens'  Bank  of  Dyersburg,  144  Ala.  562,  39 
South.  329,  1  L.  R.  A,  (N.  S.)  242,  113  Am.  St.  Rep.  61  (but  see  Bank 
of  Guntersville  v.  Jones  Cotton  Co.,  156  Ala.  525,  46  South.  071  : 
First  Nat.  Bank  of  Birmingham  v.  Wilkesbarre  Lace  Mfg.  Co.,  162 
Ala.  309,  50  South.  153) ;  Searles  v.  Smith  Grain  Co.,  80  Miss.  688, 
32  South.  287.  See  ''Ba)iks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§ 
S76,  678;  Cent.  Dig.  §  179. 

110  Tolerton  &  Stetson  Co.  v.  Anglo-California  Bank,  112  Iowa, 
706,  84  N.  W.  930,  50  L.  R.  A.  777 ;  Hall  v.  Keller,  64  Kan.  211,  67 
Pac.  518,  62  L.  R.  A.  758,  91  Am.  St.  Rep.  209:  Central  Mercantile 


§§  63-65)  COLLATERAL  SECURIXr  255 

although  it  turns  out  to  be  forged,  he  has  no  recourse  against 
the  bank.iii 

Lien  on  Collateral  — *-* 

While  a  bank  has,  as  a  rule,  a  general  lien  upon  securities 
coming  into  its  hands  in  the  usual  course  of  business,  where 
securities  are  pledged  with  a  bank- to  secure  the  payment  of 
a  particular  loan,  or  to  protect  the  bank  in  a  particular  trans- 
action, in  the  absence  of  a  special  agreement,  they  are  not  sub- 
ject to  a  general  lien  -for  a  balance  due  the  bank  on  general 
actount.^^^ 

Co.  T.  Oklahoma  State  Bank,  83  Kan.  504,  112  Pac.  114,  .3,3  L.  R.  A. 
(N.  S.)  954 ;  Mason  v.  A.  E.  Nelson  Cotton  Co.,  148  N.  C.  492,  02  S.  E. 
625,  18  L.  R.  A.  (N.  S.)  1221,  128  Am.  St.  Rep.  G.35 ;  (overruling 
Finch  V.  Gregg,  126  N.  C.  176,  35  S.  E.  251,  49  L.  R.  A.  679) ;  Lewis 
Leonhardt  &  Co.  v.  W.  H.  Small  &  Co.,  117  Tenn.  153,  96 
S.  W,  1051,  6  L.  R.  A.  (N.  S.)  SS7,  119  Am.  St.  Rep.  994 ;  S.  Blais- 
dell,  Jr.,  Co.  v.  Citizens'  Nat.  Bank,  96  Tex.  626,  75  S.  W.  292,  62 
L.  R.  A.  9G8,  97  Am.  St.  Rep.  944  (overruling  Landa  v.  Lattin  Bros., 
19  Tex.  Civ.  App.  246,  46  S.  W.  48) ;  Blaisdell  &  Co.  v.  White  &  Co. 
(Tex.  Civ.  App.)  76  S.  W.  70.  See  49  L.  R.  A.  679,  note ;  1  L.  R.  A. 
(N.  S.)  242,  note;  14  Harv.  Law  Rev.  159.  See  "Banlcs  and  Bank- 
ing;' Dec.  Dig.  {Key  No.)  §  179, \  Cent.  Dig.  §§  676,  678. 

111  leather  v.  Simpson,  11  Eq.  298;  Robinson  v.  Reynolds,  2  Q.  B. 
196;  Hoffman  v.  Bank  of  Milwaukee,  12  Wall.  181,  20  L.  Ed.  366; 
Goetz  V.  Bank  of  Kansas  Citj%  119  U.  S.  551,  7  Sup.  Ct.  318,  30  L. 
Ed.  .515.     See  4  Harv.  Law  Rev.  297,  303. 

A  draft  directed  the  drawee  to  pay,  and  to  charge  the  same  to  ac- 
count of  certain  flax  seed,  forged  duplicate  bills  of  lading  for  which 
were  attached  to  the  draft.  The  acceptance  was:  "Accepted  *  *  * 
against  indorsed  bills  of  lading"  for  the  flax  seed.  Before  arrival  6t 
the  steamship  on  which  was  the  flax  seed,  according  to  the  bills  of 
lading,  and  without  knowledge  that  it  was  not  there,  or  that  the 
bills  of  lading  were  forged,  the  acceptor  paid  the  draft.  Held,  that 
acceptance  was  conditioned  on  delivery  of  genuine  bills  of  lading,  and 
that  this  condition  was  not  waived  by  payment  without  knowledge 
of  the  facts ;  so  that,  in  the  absence  of  special  equities,  the  acceptor 
could  recover  the  money  paid.  Guaranty  Trust  Co.  of  New  York 
V.  Grotriau,  114  Fed.  433,  52  C.  C.  A.  235,  57  L.  R.  A.  689.  See 
'•Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  170;  Cent.  Dig.  §§  676, 
678. 

112  Ante,  p.  210. 


256  BANK  NOTES  (Ch.  8 

CHAPTER  VIII 

BANK  NOTES 

66.  Definition  and  Cliaracter. 

67.  Power  to  Issue. 

DEFINITION  AND  CHARACTER 

66.  A  bank  note  is  a  promissory  note  issued  by  a  bank  and 

payable  to  bearer  upon  demand.  Bank  notes  are 
designed  to  circulate  as  a  substitute  for  money,  but 
they  are  not  a  legal  tender,  although  they  are  a 
good  tender,  unless  objected  to  on  that  ground. 
By  weight  of  authority  (though  there  are  decisions 
to  the  contrary)  a  bank  note  must  be  presented 
for  payment  in  order  to  charge  the  bank,  and  until 
presentment  the  statute  of  limitations  does  not  be- 
gin to  run,  but  in  states  which  have  adopted  the 
Negotiable  Instruments  Law  such  presentment  is 
not  necessary. 

POWER  TO  ISSUE 

67.  At  common  law  bank  notes  might  be  issued  by  private 

bankers,  but  in  this  country  this  power  to  issue 
such  notes  has  generally  been  confined  to  incorpo- 
rated banks,  and  by  virtue  of  a  prohibitory  tax  im- 
posed upon  the  notes  of  state  banks  and  private 
bankers  no  bank  notes  other  than  those  of  national 
banks  are  issued. 

In  General 

As  has  been  already  stated,  the  issue  of  bank  notes  for  cir- 
culation as  a  substitute  for  monev  is  not  an  essential  function 


§§  66-67)  POWER  TO  ISSUE  257 

of  banking.^  In  this  country  it  is  to-day  confined  exclusively 
to  national  banks,  not  because  there  may  not  exist  other  banks 
which  have  the  power  to  issue  bank  notes,  but  because-all  state 
banks  and  private  bankers  are  practically  excluded  from  the 
field  of  circulation  by  means  of  a  tax  of  10  per  cent,  imposed 
by  the  National  Bank  Act  upon  all  notes  of  any  person  or  of 
any  state  bank  used  for  circulation  and  paid  out  by  any  bank, 
state  or  national.-  As  a  result,  much  of  the  law  upon  the  sub- 
ject of  bank  notes  has  become  practically  obsolete. 

Formal  Requisites 

A  bank  note,  or  bank  bill,  as  the  instrument  is  sometimes  in- 
accurately termed,^  is  in  form  simply  a  promissory  note  issued 
by  a  bank  and  payable  to  bearer  usually  upon  demand.  A  bank 
note,  issued  by  a  bank  and  payable  in  the  future,  is  termed 
a  post  note.*  The  circulating  notes  of  national  banks  are 
required  to  be  payable  on  demand,  and  the  banks  are  forbid- 
den to  issue  post  notes,  or  any  other  notes  to  circulate  as  mon- 
ey than  such  as  are  authorized  by  the  National  Bank  Act.' 

Bank  Notes  as  Tender  and  Payment 

Although  bank  notes  are  intended  to  circulate  as  a  substi- 
tute for  money,  they  are  not  money ;  that  is,  legal  tender. 
Under  the  federal  constitution,  providing  that  no  state  shall 
make  anything  but  gold  or  silver  coin  legal  tender  in  payment 

1  Ante,  p.  6, 

2  Rev.  St.  U.  S.  §  3412.  The  above  section  was  superseded  by  Act 
Feb.  8,  1875,  c.  36,  IS  Stat.  311  (U.  S.  Comp.  St.  1901,  p.  2249). 
The  tax  is  not  unconstitutional.  Veasie  Bank  v.  Fenno,  8  Wall.  533, 
19  L.  Ed.  482.  See  "Banks  and  Bankmg"  Dec.  Dig.  {Key  No.)  §§  205, 
272;   Cent.  Dig.  §  161. 

3  See  Eastman  v.  Com.,  4  Gray  (Mass.)  416.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  196;   Cent.  Dig.  §§  738-7.J2. 

^  See  Key  v.  Knott,  9  Gill  &  J.  (Md.)  342 ;  Campbell  v.  Missis- 
sippi Union  Banlc,  6  How.  (Miss.)  G25.  See  "Banks  and  Banking,'' 
Dec.  Dig.  (Key  No.)  §  196;    Cent.  Dig.  §§  738-7//2. 

5  Rev.  St.  U.  S.  §§  5182,  5183  (U.  S.  Comp.  St.  1901,  pp.  3481,  3482). 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  %  272;  Cent.  Dig.  §§ 
738-832. 

Tiff.Bk;s.&  B.— 17 


258  BANK    NOTES  (Ch.  8 

of  debts,  no  state  has  power  to  make  bank  notes  legal  tender.® 
Xor  under  the  National  Bank  Act  are  the  circulating  notes  of 
national  banks  legal  tender,  since  they  are  receivable  in  pay- 
ment only  of  taxes  and  certain  other  dues  to  the  United 
States,  and  for  certain  debts  and  demands  owing  by  the  Unit- 
ed States,  and  by  national  banks  for  debts  and  liabilities  to 
themselves.''  Bank  notes  are,  however,  a  good  tender,  unless 
specifically  objected  to  on  the  ground  that  they  are  not  mon- 
ey,^ provided  they  are  current  at  their  par  value  and  redeem- 
able upon  presentation." 

Where,  however,  a  counterfeit  note  has  been  received  in 
payment,  the  creditor  may  repudiate  it  and  resort  to  the  orig- 
inal debt,^°  provided  he  returns  the  note  to  the  debtor  without 
unreasonable  delay,^^  for,  it  is  said,^^  although  the  note  was 
of  no  intrinsic  value,  it  should  be  returned  to  the  debtor,  so 
as  to  enable  him  to  trace  it  out  and  fall  back  upon  the  person 
from  whom  he  received  it.  The  right  to  repudiate  the  pay- 
ment is  the  same  if  the  bank  had  stopped  payment,  the  knowl- 

6  Article  1,  §  10. 

V  Rev.  St.  U.  S.  §§  51S2,  5196  (U.  S.  Comp.  St.  1901,  pp.  34S1,  3492). 

8  Hoyt  V.  Byrnes,  11  Me.  475;  Phillips  v.  Blake,  1  Mete.  (Mass.) 
156 ;  Cooley  v.  Weeks,  10  Yerg.  (Tenn.)  141.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §§  196-212,  272;  Cent.  Dig.  §§  738-832; 
■'Payment;'  Dec.  Dig.  (Key  No.)  §  12;    Cent.  Dig.  §§  42-61. 

9  Ward  V.  Smith,  7  Wall.  447,  19  L.  Ed.  207.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §§  196-212;  272;  Cent.  Dig.  §§  738- 
832;   "Payment,"  Dec.  Dig.  (Key  No.)  §  12;   Cent.  Dig.  §§  Ji2-61. 

10  Young  V.  Adams,  6  Mass.  182;  Ramsdale  v.  Horton.  3  Pa.  330; 
Thomas  v.  Todd,  6  Hill  (N.  Y.)  340 ;  Hargrave  v.  Dusenberry,  9  N. 
C.  326.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  196-212, 
272;    Cent.  Dig.  §§  738-832. 

11  Simms  v,  Clark,  11  111.  137;  Atwood  v,  Cornwall,  2S  Mich.  336, 
15  Am.  Kep.  219;  Thomas  v.  Todd,  6  Hill  (N.  Y.)  340;  Raymond  v. 
Baar,  13  Serg.  &  R.  (i-a.)  318,  15  Am.  Dec.  603;  Pindall's  Ex'rs  v. 
Northwestern  Bank,  34  Ya.  617.  ^'ee  "Payment,"  Dec.  Dig.  (Key  No.) 
§  12;    Cent.  Dig.  §§  ^8,  oS. 

12  Thomas  v.  Todd,  6  Hill  (N.  Y.)  340.  See  "Payment,"  Dec.  Dig. 
(Key  NO.)  §  12;  Cent.  Dig.  §§  .',8,  58. 


§§  66-67)  POWER  TO  ISSUE  259 

edge  of  the  fact  not  having  reached  the  parties.*'  In  such 
case,  also,  the  creditor  must  return  the  note  within  a  reason- 
able time.**  It  seems,  however,  that  if  payment  is  made  in 
good  faith  to  a  bank  of  notes  purporting  to  be  its  own,  which 
are  received  as  such,  the  bank  cannot  recover  the  amount.*' 
Bank  notes  have  frequently  been  made  legal  tender  in  pay- 
ment of  debts  due  to  the  bank  which  issued  them;  *®  but  in 
the  absence  of  a  statute  to  that  effect  they  were  not  legal  ten- 
der, even  as  against  the  bank.*^  The  debtor  may,  however, 
avail  himself  of  the  notes  by  way  of  set-off  or  counterclaim 
in  an  action  by  the  bank  upon  its  demand,  provided  he  ac- 
quired the  notes  before  the  bank's  insolvency.*^ 

13  Frontier  Bank  v.  Morse,  22  Me.  88,  38  Am.  Dec.  284;  Ontario 
Bank  v.  Lightbody,  13  Wend.  (N,  Y.)  101,  27  Am.  Dec.  179;  West- 
fall  V.  Braley,  10  Ohio  St.  188,  75  Am.  Dec.  509 ;  Harley  v.  Thornton, 
2  Hill  (S.  C.)  509,  note ;  Wainwrigbt  v.  Webster,  11  Vt.  576,  .34  Am. 
Dec.  707.  Contra:  Lowrey  v.  Murrell,  2  Port.  (Ala.)  280,  27  Am. 
Dec.  651 ;  Bayard  v.  Shuuk,  1  Watts  &  S.  (Pa.)  92,  37  Am.  Dec.  441 ; 
Scruggs  V.  Gass,  8  Yerg.  (Tenn.)  175,  29  Am.  Dec.  114.  See  "Pay- 
ment," Dec.  Dig.  {Ken  A^o.)  §  12;   Cent.  Dig.  §§  48,  58. 

iiCamidge  v.  Allenby.  6  B.  «&  C.  373;  Frontier  Bank  v.  Morse. 
22  Me.  88,  38  Am.  Dec.  284 ;  Ontario  Bank  v.  Lightbody,  13  Wend.  (N. 
Y.)  101,  27  Am.  Dec.  179;  Westfall  v.  Braley,  10  Ohio  St.  188,  75 
Am.  Dec.  509.  See  "Payment,"  Dec.  Dig.  (Key  No.)  §  12;  Cent.  Dig. 
§§  48,  58. 

15  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333,  6  L. 
Ed.  334;  Third  Nat.  Bank  v.  Allen,  59  Mo.  310.  Of.  President,  etc., 
of  Gloucester  Bank  v.  President,  etc.,  of  Salem  Bank,  17  Mass.  33. 
See  4  Ilarv.  Law  Rev.  297,  302.  See  "Payment,"  Dec.  Dig.  (Key  No.) 
§  12;   Cent.  Dig.  §§  ^S,  58. 

16  See  Moise  v.  Chapman,  24  Ga.  249;  Railey  v.  Bacon,  26  Miss. 
455.  See  "BanM  and  Banking:'  Dec.  Dig.  (Key  No.)  §§  196-212,  272; 
Cent.  Dig.  §§  738-832;  "Payment,"  Dec.  Dig.  (Key  No.)  §  12;  Gent. 
Dig.  §§  J,2-61. 

17  See  Suffolk  Bank  v.  Lincoln  Bank,  Fed.  Cas.  No.  13,590,  3  Ma- 
son, 1.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  196-212, 
272;  Cent.  Dig.  §§  738-832;  "Payment:'  Dec.  Dig.  (Key  No.)  §  12; 
Cent.  Dig.  §§  42-61. 

18  American  Bank  v.  Wall,  56  Me.  167;  President,  etc.,  of  Niagara 
Bank  v.  Rosevelt,  9  Cow.  (N.  Y.)  409 ;   In  re  Receiver  Middle  District 


260  BANK    NOTES  (Ch.  8 

Rights  of  Holder  in  Due  Course 

Like  other  negotiable  instruments  payable  to  bearer,  bank 
notes  are  transferable  by  delivery,  with  the  usual  incidents 
of  such  negotiation  of  a  negotiable  instrument.  A  purchaser 
for  value  without  notice  from  one  in  possession  of  a  bank 
note  acquires  a  perfect  title,  irrespective  of  the  title  of  the 
transferror,  even  though  he  was  a  finder  of  the  note  or  ac- 
quired it  by  the  ft.  ^^  The  rule  is  the  same,  although  the  note 
was  never  issued,  and  was  stolen  or  otherwise  surreptitiously 
put  into  circulation.'"  It  is  to  be  observed  that  bank  notes  are 
not,  like  other  demand  paper,  deemed  to  be  overdue  after  a 
reasonable  time,  although  no  demand  has  been  made,  but, 
being  intended  to  circulate  indefinitely,  are  overdue  only  after 
demand,  so  that  a  purchaser  of  a  bank  note  is  not  charged 
with  notice  because  the  note  has  been  long  outstanding.-^ 

While  in  a  suit  upon  a  negotiable  instrument  the  holder  is 
deemed  prima  facie  to  be  a  holder  in  due  course,  if  it  be 
shown  that  there  was  fraud,  duress,  or  illegality  in  the  issue 

Bank,  1  Paige  (N.  Y.)  5S.j,  19  Am.  Dee.  452;  Haxtun  v.  Bishop,  3 
Wend.  (N.  T.)  1.3 ;  Clarke  v.  Hawkins.  5  R.  I.  219.  But  see,^  Eastern 
Bahk  V.  Capron,  22  Conn.  G39;  President,  etc.,  of  Hallowell  &  Au- 
gusta Bank  v.  Howard,  13  Mass.  235.  See  ''Banks  arid  Banking," 
Dec.  Dig.  (Key  No.)  §§  196-212,  272;    Cent.  Dig.  §§  738-832. 

19  Miller  v.  Race,  1  Burr.  452;  City  Bank  of  Columbus  v.  Farm- 
ers' &  Planters'  Bank  of  Baltimore,  Fed.  Cas.  No.  2,738;  Sinclair 
V.  Piercy,  5  J.  J.  Marsh.  (Ky.)  63.  Sec  "Banks  and  Banking,"  Dec. 
Dig.  {Key  A'o.)  §§  207-210,  272;   Cent.  Dig.  §§  76S-S12. 

20  White  V.  How,  Fed.  Cas.  No.  17,549,  3  McLean,  291 ;  Olmstead 
V.  Winsted  Bank,  32  Conn.  278,  85  Am.  Dec.  2G0 ;  Worcester  County 
Bank  v.  Dorchester  &  M.  Bank,  10  Cush.  (Mass.)  488,  57  Am.  Dec. 
120.  See,  also,  Cooke  v.  United  States,  91  U.  S.  389,  23  L.  Ed.  237 
(treasury  notes).  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§ 
207-210,  272;   Cent.  Dig.  §§  768-812. 

21  See  Solomons  v.  Bank  of  England,  13  East,  135n;  Bullard  v. 
Bell,  Fed.  Cas.  No.  2,121,  1  Mason,  243;  Ballard  v.  Inhabitants  of 
Greenbush,  24  Me.  3oG ;  Shute  v.'  Pacific  Nat.  Bank,  13G  Mass.  487. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  207-210,  272;  Cent. 
Dig.  §§  768-812. 


§§  66-67)  rowKK  to  issue  261 

or  negotiation  of  the  instrument,  the  burden  is  on  the  holder 
to  prove  that  he  or  some  person  under  whom  he  claims  was  a 
holder  in  due  course.  In  the  case  of  a  bank  note,  however, 
it  has  been  held  that  the  burden  does  not  shift,  but  that,  not- 
withstanding it  be  shown  that  the  note  was  stolen,  it  is  for  the 
bank  to  show  that  the  holder  did  not  give  value  or  had  notice 
of  defect.--  This  exception  in  the  cases  of  bank  notes  ap- 
parently no  longer  prevails  where  the  Negotiable  Instruments 
Law  has  been  enacted. ^^ 

Pozver  to  Issue 

At  common  law  bank  notes  might  be  issued  by  individual 
bankers,  but  the  right  to  issue  them  has  very  generally  been 
confined  to  incorporated  banks.  The  power  is  expressly  con- 
ferred upon  national  banks, ^*  and  in  practice  the  issue  of  bank 
notes  is  confined^  to  them.^^ 

The  question  has  sometimes  arisen  whether  bank  notes  is- 
sued by  state  banks  were  bills  of  credit,  within  the  meaning 
of  the  federal  constitution,  prohibiting  any  state  from  emitting 
such  bills.-®  To  be  a  bill  of  credit,  within  the  prohibition,  it 
is  necessary  that  the  instrument  be  issued  by  a  state,  that  it 
involve  the  faith  of  the  state,  but  without  the  appropriation  of 
any  specific  fund  for  its  payment  and  ultimate  redemption,  and 
that  it  be  designed  to  circulate  as  money  on  the  credit  of  the 
state,  in  the  ordinary  uses  of  business. ^'^  Accordingly  it  has 
been  held  that  notes  issued  by  a  banking  corporation  estab- 

2  2  Louisiana  Bank  v.  Banli  of  United  States,  9  Mart.  (O.  S.  La.) 
398:  Pelletier  v.  State  Nat.  Bank,  114  La.^174,  38  South.  132 ;  Worces- 
ter County  Bank  v.  Dorchester  &  M.  Bank,  10  Cush.  (Mass.)  488,  57 
Am.  Dec.  120 ;  Wyer  v.  Dorchester  &  Milton  Bank,  11  Cush.  (Mass.) 
51,  59  Am.  Dec.  137.  See  "Banfcs  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  212;    Cent.  Dig.  §  82.',. 

23  Negotiable  Instruments  Law,  §  59. 

2  4  Rev.  St    U,  S.  §  513G  (U.  S.  Comp.  St.  1901,  p.  3455). 

2  5  Ante,  p.  257. 

26  Const.  U.  S.  art.  1,  §  10. 

2  T  Briscoe  v.  Bank  of  Kentucky,  11  Pet.  257,  9  L.  Ed.  709;  Craig 
V,  Missouri.  4  Pet.  410,  7  L.  Ed.  903;    Black,  Const.  L.  270.       See 


262  BANK   NOTES  (Ch.  8 

lished  on  behalf  of  the  state,  which  has  a  paid-up  capital  and 
may  be  sued  for  its  debts,  are  not  bills  of  credit,  even  though 
the  state  owns  the  entire  stock,  and  the  legislature  elects  the 
directors,  and  the  faith  of  the  state  is  pledged  for  the  redemp- 
tion of  the  notes. 2^ 
Necessity  of  Demand — Limitation 

Although,  as  a  rule,  if  paper  is  payable  on  demand,  and  not 
at  a  particular  place,  no  presentment  is  necessary,  and  an  ac- 
tion accrues  against  the  maker  from  the  time  of  issue,  some 
courts  have  refused  to  apply  this  doctrine  to  bank  notes, 
which,  like  certificates  of  deposit,  clearly  contemplate  present- 
ment at  the  banking  house ;  "^^  while  other  courts  have  held 
that  if  no  place  of  payment  is  specified  a  demand  is  not  neces- 
sary as  a  prerequisite  to  suit.^°  Courts  which  hold  that  in 
order  to  sustain  an  action  upon  a  bank  note  there  must  be  a 
demand  of  payment  have  held  consistently  that  the  statute  of 
limitations  does  not  begin  to  run  upon  the  issue  of  the  note, 
but  that  it  runs  from  demand  and  refusal. ^^      On  the  other 

'•Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  197,  19S;  Cent.  Dig.  §§ 
T43-75i. 

28  Briscoe  v.  Bank  of  Kentucky,  11  Pet.  257,  9  L.  Ed.  709;  Dar- 
rington  v.  Bank  of  Alabama,  13  How.  12,  14  L.  Ed.  30;  Curran  v. 
Arkansas,  15  How.  304,  14  L.  Ed.  705.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §§  196-198;   Cent.  Dig.  §§  738-751. 

2  9  Thurston  v.  Wolf  borough  Bank,  18  N.  H,  391,  45  Am.  Dec.  3S2 ; 
Crawford  v.  Bank  of  Wilmington,  61  N.  C.  136  r  F.  &  M.  Bank  of 
Memphis  v.  White,  2  Sneed  (Tenn.)  482,  64  Am.  Dec.  772.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key.  No.)  §  212;    Cent.  Dig.  §  817. 

30  Dougherty  v.  Western  Bank  of  Georgia,  13  Ga.  287;  Bryant  v. 
Damariscotta  Bank,  18  Me.  240;  State  Bank  v.  Van  Horn,  4  N.  J. 
Law,  382;    Haxtun  v.  Bishop,  3  Wend.   (N.  Y.)  13. 

If  payable  at  the  bank,  demand  is  required.  Bank  of  Kentucky 
V.  Hickey,  14  Ky.  225.  See,  also,  Bank  of  Utica  v.  Magher,  IS  Johns. 
(N.  Y.)  341.  See  "Banks  and  Banking,"  Dec.  Dig.  {Kcy^No.)  §  212; 
Cent.  Dig.  §§  770,  817. 

31  Thurston  v.  Wolf  borough  Bank,  18  N.  H.  391,  45  Am.  Dec.  382; 
F.  &  M.  Bank  of  Memjihis  v.  White,  2  Sneed  (Tenn.)  482,  64  Am.  Dec. 
772   (cf.    State   v.    President,   etc..   of   Bank   of  Tennessee,   5   Baxt. 


§§  66-67)  POWER  TO  ISSUE  '        2G3 

hand,  the  courts  which  hold  that  demand  is  not  necessary  to 
a  cause  of  action,  recognizing  that  bank  notes  are  intended  to 
circulate  indefinitely,  have  held  that  the  statute  of-Jiwiitations 
does  not  apply  to  bank  notes,^-  unless  the  bank  has  suspended 
payment  and  the  notes  have  ceased  to  circulate  as  currency.^ ^ 
It  seems  that  under  the  Negotiable  Instruments  Law  no  de- 
mand is  necessary  in  order  to  charge  the  bank,  and  conse- 
quently that  the  statute  of  limitations  would  begin  to  run 
from  the  date  of  issue. ^'^ 

Lost  or  Destroyed  Note 

Where  a  negotiable  instrument  has  been  lost  or  destroyed, 
so  that  its  surrender  has  become  impossible,  the  holder  ordi- 
narily, upon  due  proof  thereof,  may  recover  the  amount,  upon 
giving  indemnity  against  subsequent  liability  thereon,  in  some 
jurisdictions  in  equity,  and  in  others  at  law.  The  matter  is 
very  generally  regulated  by  statute.  In  some  jurisdictions,  a 
recovery  has  been  permitted  upon  proof  of  the  destruction  of 
the  instrument  without  indemnity ;  and  recovery  in  such  case, 
has  been  permitted  upon  a  destroyed  bank  note.^^     It  seems 

ITenn.]  101).  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  212; 
Cent.  Dig.  §§  816,  Sll. 

32  Dougherty  v.  Western  Bank  of  Georgia,  13  Ga..287;  Long  v. 
Bank  of  Tanceyville,  81  N.  C.  41.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  212;   Cent.  Dig.  §§  816,  817. 

33  Kimbro  v.  Bank  of  Fulton,  49  Ga.  419;  Samples  v.  Bank,  Fed. 
Gas.  No.  12,278,  1  Woods,  523.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  212;   Cent.  Dig.  §§  816,  817. 

3  4  Negotiable  Instruments  Law,  §  70;    ante,  p.  81. 

3  5  Bank  of  Mobile  v.  Meagher,  33  Ala.  622;  Bank  of  Louisville  v. 
Summers,  14  B.  Mon.  (Ky.)  306;  Wade  v.  New  Orleans  Canal  & 
Banking  Co.,  S  Rob.  (La.)  140,  41  Am.  Dec.  296;  Hagerstown  Bank 
V.  Adams  Exp.  Co.,  45  Pa.  419,  84  Am.  Dec.  511;  Ross  v.  Bank  of 
Burlington,  1  Aikens  (Vt.)  48,  15  Am.  Dec.  664. 

On  proof  of  a  destruction  of  its  notes  a  national  bank  is  en- 
titled to  receive  from  the  comptroller  of  the  currency  blank  notes  in 
lieu  thereof.  Rev.  St.  U.  S.  §  51S4  (U.  S.  Comp.  St.  1901^  p.  34S2). 
Provision  is  made  for  the  redemption  of  notes  issued  to  a  national 
bank,  which  may  have  been  lost  or  stolen  from  it  and  put  In  circu- 


264  BANK   NOTES  (Ch.  8 

clear,  however,  that  indemnity  should  be  required  in  all  cases, 
and  that  the  identification  of  the  notes,  by  number  or  other- 
wise, should  be  so  complete  that  they  can  be  described  in  the 
bond,  so  as  to  enable  the  bank,  in  case  they  were  ever  pre- 
sented by  a  bona  fide  holder,  to  identify  them,  and  to  avail 
itself  of  the  indemnity.^^  Thi^  would  in  most  cases  render  a 
recovery  impossible,  from  the  impossibility  of  identifying  the 
notes.  The  same  considerations  apply  even  more  strongly  to 
a  lost  bank  note,  and  it  has  been  held  that  in  such  case  the 
loser  must  bear  the  loss  and  that  there  can  be  no  recovery 
from  the  bank,^^  although  if  a  case  arose  where  identification 
were  possible  there  seems  no  reason  to  deny  a  recovery.^ ^ 

Where  the  owner  of  a  bank  note  has  cut  it  in  halves  for 
safety  in  transmission,  it  has  been  held  that  he  may  recover 
upon  production  of  one  of  the  halves  and  proof  of  the  loss  of 
the  other. ^^  Where  the  owner  had  been  so  cautious,  it  would 
be  probable  that  he  would  also  preserve  the  number  of  the 
note,  and  so  would  be  able  to  give  adequate  indemnity. 

lation  without  the  signature  or  on  the  forged  signature  of  its  presi- 
dent and'  cashier.  Act  July  28,  1S92,  c.  317,  27  Stat.  322  (U.  S.  Comp. 
St.  1901,  p.  3491).  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xcr.) 
§§  208,  212;    C.ent.  Ditj.  §§  771,  815. 

3  6  Tower  v.  President,  etc.,  of  Appleton  Bank,  3  Allen  (Mass.)  387, 
81  Am.  Dec.  665.  See,  also,  Irwin  v.  Planters'  Bank,  1  Humph. 
(Tenn.)  145.  See  "Banks  and  Bankinrj,"  Dec.  Dig.  (Key  Z^o.)  §§  208, 
212;    Cx;nt.  Dig.  §§  769-772,  815. 

3  7  Burridge  v.  Geauga  Bank,  Wright  (Ohio)  688.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  ISto.)  §§  208,  212;   Cent.  Dig.  §§  769-772,  815. 

38  See  Waters  v.  Bank  of  Georgia,  R.  M.  Charlt.  (Ga.)  193 ;  Robin- 
son V.  Bank  of  Darlen,  IS  Ga.  65.  ,See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §§  208,  212;   Cent.  Dig.  §§  769-773^2,  S15. 

3  9  Bullet  V.  Bank  of  Pennsylvania,  Fed.  Cas.  No.  2,125,  2  Wash.  C. 
C.  172;  Martin  v.  Bank  of  the  United  States.  Fed.  Cas.  No.  9,1.56,  4 
Wash.  C.  C.  253 ;  Armat  v.  Union  Bank  of  Georgetown,  Fed.  Cas. 
No.  535,  2  Cranch.  C.  C.  180 ;  Sill  v.  Bank  of  United  States,  5  Conn. 
106,  8  Am.  Dec.  44';  President,  etc.,  of  State  Bank  of  Iliruois  v.  Ares- 
ten,  4  111.  135,  36  Am.  Dec.  536;  Hinsdale  v.  Bank  of  Orange,  6 
Wend.  (N.  Y.)  378.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Ao.)  §§ 
208,  212;    Cent.  Dig.  §§  769-773y2,  815. 


§§  66-G7)  POWER  TO  ISSUE  2G5 

Security  for  Circulation 

Provision  for  the  protection  of  the  holders  of  bank  notes 
against  the  insolvency  of  the  bank  have  frequently 4»een  made, 
by  requiring  a  certain  reserve  of  cash  for  the  payment  of  the 
notes,  or  by  giving  the  holders  a  certain  preference  if  the  bank 
becomes  insolvent,  or  by  requiring  securities  to  be  pledged 
and  deposited  with  some  public  officer  to  secure  the  payment 
of  the  notes.  In  view  of  the  exclusion  of  all  except  national 
banks  from  the  field  of  circulation,  the  law  on  this  subject 
with  reference  to  state  banks  need  not  be  considered. 

National  Bank  Notes 

Under  the  National  Bank  Act,  any  bank,  proposing  to  issue 
notes,  must  secure  them  by  a  deposit  with  the  treasurer  of  the 
United  States  of  government  bonds.  Such  deposit  entitles  the 
bank  to  receive  from  the  comptroller  of  the  currency  notes, 
which,  when  received,  are  in  blank,  certifying  that  tlie  security 
for  them  is  in  the  hands  of  the  treasurer,  and  which,  when 
signed  by  the  proper  officers  of  the  bank,  become  its  promises 
to  pay  upon  demand,  and  which  can  then  be  issued  for  cir- 
culation.*" The  notes  are  to  be  paid  by  the  banks  when  pre- 
sented,*^ but  the  law  makes  provision  for  their  redemption  by 
the  treasury  at  Washington ;  each  bank  being  required  to 
maintain  in  the  treasury  for  that  purpose  a  reserve  equal  to 
5  per  cent,  of  its  circulation.*^  While  the  notes  are  the  obli- 
ge Rev.  St.  U.  S.  §§  5159,  5160  (U.  S.  Comp.  St.  1901,  p.  3469);  Id. 
§  5171  (superseded  by  Act  March  14, 1900.  c.  41,  §  12,  31  Stat.  49  [U.  S. 
Comp.  St.  1901,  p.  3475]) ;  Id.  §  5172  (amended  by  Act  May  30,  1908, 
c.  229.  §  11,  35  Stat.  551  [U.  S.  Comp.  St.  Supp.  1909,  p.  1329]).  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  272;  Cent.  Dig.  §§  763- 
76'7. 

41  Rev.  St.  U.  S.  §  5182  (U.  S.  Comp.  St.  1901,  p.  3481). 
4  2  Act  June  20,  1874,  c.  343,  §  3,  IS  Stat.  123  (U.  S.  Comp.  St.  1901, 
p.  34SS).  See,  also.  Act  July  14,  1S90,  c.  70S,  §  6,  26  Stat.  289  (U.  S. 
Comp.  St.  1901,  p.  3490) ;  Act  July  28,  1892,  c.  317,  27  Stat.  322  (U.  S. 
Comp.  St.  1901,  p.  3491);  Act  May  30,  1908,  c.  229,  §  12,  35  Stat 
552  (U.  S.  Comp.  St.  Supp.  1909,  p.  1331).  See  "Banks  and  Bank- 
ing;' Dec.  Dig.  (Key  No.)  §  27,2;    Cent.  Dig.  §§  738-832. 


266  BANK    NOTES  (Cll.  8 

gations  of  the  banks,  they  thus  carry  with  them  certain  en- 
gagements binding  upon  the  government;  the  provision  for 
redemption  at  the  treasury  binding  the  government  to  pay  on 
demand  all  notes  when  presented  in  due  form,  and  not  merely 
to  the  extent  of  the  reserve,  while  in  case  of  the  failure  of  a 
bank  the  law  provides  for  the  immediate  payment  of  all  its 
notes  at  the  treasury,*^  the  government  thus  making  itself 
fully  liable  in  any  event  for  the  full  amount  of  the  notes.** 

*3  Rev.  St.  U.  S.  §§  5221-5229  (U.  S.  Comp.  St.  1901,  pp.  3503-3506). 
4*  See  Dunbar,  Theory  Hist.  Banking,  pp.  137-140. 


§   68)  BANKING  CORPORATIONS  ,  267 


CHAPTER  IX 

BANKING  CORPORATIONS 

G8.  Incorporation. 

69.  Place  of  Transacting  Business. 

70.  Capital  Stock. 

71.  Powers  as  to  Contracts. 

72.  Buying  and  Selling  Property. 

73.  Borrowing  Money. 

74.  Guaranty  and  Suretyship. 

75.  Ultra  Vires  Acts  and  Contracts. 

76.  Liability  of  Officers  to  Bank — At  Common  Law. 

77.  Remedies  Against  Officers. 

78.  Statutory  Liability. 


INCORPORATION 

68.  Subject  to  constitutional  limitations,  banking  corpora- 
tions may  be  created  by  the  state  legislatures  and 
by  Congress  under  general  or  special  laws,  with  the 
usual  incidents  of  incorporation. 

Scope  of  Chapter 

Many  questions  relating  to  incorporated  banks,  state  and  na- 
tional, have  already  been  treated,  or  will  be  treated  later, 
where  they  more  naturally  fall.  In  this  chapter  it  is  proposed 
to  consider  briefly  certain  matters  relating  to  banking  corpo- 
rations which  remain.  Much  of  the  law  relating  to  such  cor- 
porations is  merely  a  part  of  the  law  relating  to  corporations 
generally,  and  the  treatment  will  be  confined  to  a  few  matters 
more  particularly  relating  to  corporations  with  banking  powers. 

Incorporation 

Tbe  power  of  the  state  legislatures  to  create  corporations, 
including  banking  corporations,  and  to  confer  powers  and 
privileges  upon  them  within  the  state,  is  absolute,  except  so  far 


2G8  BANKING  CORPORATIONS  (Ch.  9 

as  they  may  be  restricted  by  the  state  or  federal  constitutions.^ 
In  some  states  the  constitutions  require  acts  creating  corpora- 
tions with  banking  powers  before  they  shall  take  effect  to  be 
submitted  to  the  people,  but  these  limitations  have  been  held 
to  apply,  not  to  banks  of  deposit  and  discount,  but  only  to 
banks  of  issue.-  Congress  has  power  to  incorporate  a  bank, 
and  may  by  general  law  provide  for  the  incorporation  of  na- 
tional banks.^  Territorial  legislatures,  vested  by  Congress 
with  general  legislative  powers,  have  power  to  create  banking 
corporations.'*  In  the  absence  of  constitutional  limitations, 
corporations  may  be  created  under  special  as  well  as  under  gen- 
eral laws ;  but  in  most  states  the  legislature  is  prohibited  from 
creating  corporations,,  with  certain  reservations,  other  than 
under  general  laws.^ 

A  general  law  authorizing  the  formation  of  corporations  de- 
fines the  purpose  for  which  they  may  be  formed,  and  prescribes 
the  steps  necessary  to  form  them.  It  generally  requires,  among 
other  steps,  articles  of  incorporation  to  be  filed  in  some  pub- 
lic office,  setting  forth  the  certain  name  of  the  corporation, 
the  nature  of  its  business  and  the  principal  place  of  transact- 
ing it,  the  period  of  the  corporation's  duration,  the  names  and 

1  Clark,  Corp.  (2(1  Ed.)  29. 

2  People  ex  rel.  Badger  v.  Loewenthal,  9.3  111.  191 ;  Anthony  v.  In- 
ternational Bank,  93  111.  22.5 ;  Pape  v.  Capitol  Bank  of  Topeka,  20 
Kan.  440,  27  Am.  Rep.  183;  Dearborn  v.  Northwestern  Sav.  Bank,  42 
Ohio  St.  617,  51  Am.  Rep.  851;  Bates  v.  People's  Savings  &  Loan 
Ass'n,  42  Ohio  St.  655 ;  State  ex  rel.  Caples  v.  Hibernian  Savings  & 
Loan  Ass'n,  8  Or.  396.  See,  also,  Reapers'  Bank  v.  Willard,  24  111. 
433,  76  Am.  Dec.  755 ;  Smith  v.  Bryan,  34  111.  364 ;  Dupee  v.  Swigert, 
127  III.  494,  21  N.  E.  622. 

Sometimes,  however,  banks  of  deposit  and  discount  are  included. 
People  v.  National  Sav.  Bank  (111.)  11  N.  E.  170.  See  "Banks  and 
Banldngr  Dec.  Dig.  {Key  A'o.)  §§  25,  26;  Cent.  Dig.  §§  29-33. 

3  Post,  p.  361. 

4  People  ex  rel.  Stickney  v.  Marshall,  6  111.  072 :  Michigan  Bank  v. 
Williams,  5  Wend.  (N.  Y.)  480.'  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §§25,  26;  Cent.  Dig.  §§  29-33. 

5  Clark,  Corp.  (2d  Ed.)  37. 


§    69)  PLACE    OF   TRANSACTING    BUSINESS  2G9 

places  of  residence  of  the  incorporators,  the  number  of  the 
directors  and  the  names  and  places  of  those  who  are  to  act 
until  an  election  is  held,  and  the  amount  of  the  caprtal  stock 
and  how  it  is  to  be  paid  in,  and  the  like.  A  compliance  with 
the  formalities  to  be  observed  as  conditions  precedent  to  be- 
coming a  corporation  is  essential  to  the  legal  existence ;  but 
a  substantial  compliance  is  sufficient."  Moreover,  a  corpora- 
tion de  facto  may  exist  notwithstanding  noncompliance  with 
conditions  precedent ;  and  in  such  case  the  existence  of  the 
corporation  can  be  questioned  only  by  the  state  in  a  direct 
proceeding  brought  for  that  purpose.^  Questions  of  estoppel 
also  arise  where  persons  pretendl  to  form  a  corporation  and 
assume  to  exercise  corporate  powers,®  as  well  as  questions  as 
to  the  personal  liability  as  partners  of  persons  who  hold 
themselves  out  as  a  corporation,  and  contract  as  such,  without 
having  even  a  de  facto  corporate  existence.®  The  law  in  re- 
spect to  the  formation  of  banking  corporations  and  to  the  other 
matters  above  mentioned  is  part  of  the  law  relating  to  corpo- 
rations generally,  and  for  its  discussion  the  reader  is  referred 
to  the  books  upqn  corporations  and  to  the  statutes  of  the  par- 
ticular states.  An  exception  will  be  made,  however,  in  the 
cases  of  national  banks,  both  because  they  are  found  in  all 
the  states  and  because  the  distinctive  law  concerning  them  lies 
in  narrow  compass,  admitting  of  separate  treatment. 

PLACE  OF  TRANSACTING  BUSINESS 

69.  Generally  the  principal  operations  of  a  banking  corpo- 
ration must  be  carried  on  at  the  place  designated 
therefor  by  its  charter,  although  it  may  through 
agents  in  other  places  perform  acts  properly  inci- 
dental to  its  business.'  Unless  expressly  author- 
ized, a  banking  corporation  may  not  establish  a 
branch  bank, 

«  Clark,  Corp.  (2tl  Ed.)  40.  «  Clark,  Corp.  (2d  Ed.)  01. 

7  Clark,  Corp.  (2d  Ed.)  TS.  »  Clark.  Corp.   (2d  Ed.)  00. 


270  BANKING   CORPORATIONS  (Ch.  9 

In  General 

The  charter  or  articles  of  incorporation  usually  designate  the 
place — that  is,  the  city  or  town — where  the  business  is  to  be 
transacted  or  the  banking  house  is  to  be  located.  It  seems  that 
the  effect  of  this  is  to  confine  the  bank  to  that  place,  and  that, 
unless  expressly  authorized,  it  may  not  establish  a  banking 
house  or  agency  elsewhere  for  the  purpose  of  receiving  de- 
posits and  conducting  a  general  banking  business.^"  It  does 
not  follow,  however,  that  it  may  not  through  agents  in  other 
places  enter  into  contracts  and  perform  acts  w^hich  are  prop- 
erly incidental  to  the  business  as  it  is  ordinarily  conducted. 
A  banking  corporation,  having  power  to  deal  in  bills  of  ex- 
change, may  buy  bills  through  an  agent  at  a  place  other  than 
that  where  it  is  located  within  the  state,^^  or  in  another  state, 
if  permitted  by  the  laws  of  that  state.^^  It  may,  of  course, 
make  collections,  keep  money  on  deposit  for  purposes  of  ex- 
change, and  perform  a  multitude  of  other  acts  through  its 
agents  at  distant  points. 

The  National  Bank  Act  provides  that  the  organization  cer- 
tifiicate  shall  state  where  the  operations  of  loan  and  discount 
are  to  he  carried  on,  "designating  the  particular  state  *  *  * 
and  the  particular  county,  city,  town  or  village,"  ^^  and  that 

10  Brunei  v.  Citizens'  Bank,  134  Ky.  2S3,  120  S.  W.  345;  People  ex 
rel.  Piatt  v.  President,  etc.,  of  Oakland  County  Bank,  1  Doug.  (Mich.) 
2S2.  See  "Banks  and  Bankinr/,"  Dec.  Dig.  {Key  No.)  §  S3j  Cent.  Dig. 
§§  39,  40. 

11  City  Bank  of  Columbus  v.  Beach,  Fed.  Cas.  No,  2.736,  1  Blatchf. 
425.  See  Potter  v.  Bank  of  Ithaca,  7  Hill  (N.  T.)  530.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  ^'o.)  §  32;  Cent.  Dig.  §  3S. 

12  Bank  of  Augusta  v.  Earle,  13  Pet.  510,  10  L,  Ed,  274,  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  32;  Cent.  Dig.  §  38; 
"Corporations,"  Dec.  Dig.  {Key  No.)  §  52;  Cent.  Dig.  §§  1^3,  lU,  2563, 
2567. 

13  Rev.  St,  U.  S.  §  5134  (U.  S,  Comp.  St.  1901,  p.  34.54).  See  Mc- 
Cormick  V.  Market  Nat.  Bank,  162  111.  100,  44  N.  E.  3S1. 

A  national  bank  located  in  another  state  is  a  foreign  corporation, 
and  cannot  keep  an  office  of  discount  and  deposit  in  New  York,  in 


§    69)  PLACE    OF   TRANSACTING    BUSINESS     -  271 

"the  usual  business  *  *  *  shall  be  transacted  at  the  office 
or  banking  house  located  in  the  place  specified  in  its  organi- 
sation certificate."  ^*  Under  tliese  provisions  it  haiJaeen  held 
that  a  national  bank  may  not  make  a  contract  for  cashing 
checks  upon  it  at  any  other  place  than  such  office  or  banking 
house  ;^^  but  it  has  been  held  that  these  provisions  db  not 
prevent  the  purchase  of  coin  by  one  bank  at  the  office  of  an- 
other. "The  provisions,"  it  was  said,  "must  be  construed  rea- 
sonably. The  business  of  every  bank,  away  from  its  office — 
frequently  large  and  important — is  unavoidably  done  at  the 
proper  place  by  the  cashier  in  person,  or  by  correspondents  or 
other  agents."  ^^ 

The  question  of  the  power  or  authority  of  a  banking  cor- 
poration to  act  or  contract  elsewhere  than  at  the  place  where 
its  banking  house  is  established  is,  of  course,  to  be  distin- 
guished from  the  question  in  what  state  it  has  its  legal  ex- 
istence. Although  it  can  perform  certain  acts  elsewhere,  a 
banking  corporation,  like  any  other  corporation,  has  no  legal 
existence  beyond  the  state  by  which  it  was  created,  and,  so 
far  as  it  can  be  a  citizen,  resident,  or  inhabitant,  is  a  citizen, 
resident,  or  inhabitant  only  of  that  state. ^^  Questions  of  ju- 
risdiction over  it  for  purposes  of  suit  in  the  state  and  federal 
courts, ^^  and  for  purposes  of  taxation,^^  are  not  here  in- 
volved. 

violation  of  a  statute  of  that  state.  National  Bank  of  Fairhaven  v. 
Phoenix  Warehousing  Co.,  6  Hun  (N.  Y.)  71.  See  ''Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  32;  Cent.  Dig.  §  38. 

14  Rev.  St.  U.  S.  §  5190  (U.  S.  Comp.  St.  1901.  p.  34Sn).     ' 

15  Armstrong  v.  Second  Nat.  Bank  (D.  C.)  38  Fed.  883.  See  "Banks 
and  Baulking,"  Dec.  Dig.  (Key  No.)  §§  32,  239;  Cent.  Dig.  §§  38,  893. 

18  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,  19  L. 
Ed.  1008.  See,  also.  Burton  v.  Burley  (C.  C.)  13  Fed.  811^  9  Biss.  253. 
See  "Banks  and  Banking,'"  Dec.  Dig.  {Key  No.)  §  32;  Cent.  Dig.  §  38. 

17  Clark,  Corp.  (2d  Ed.)  G6. 

18  See  Beals,  Foreign  Corp.  §§  74-79.  279-2.S1 ;  post,  p.  428. 

10  See  Beals,  Foreign  Corp.  §  402  et  seq. :  Clark.  Corp.  (2d  Ed.)  219. 


272  BANKING  CORPORATIONS  (Ch.  9 

Branch  Banks 

The  right  to  establish  branch  banks  is  sometimes  confer- 
red -"  and  sometimes  withheld;  -^  but  in  this  country  banking 
corporations  are  usually  confined  to  the  exercise  of  the  es- 
sential banking  functions  at  the  place  where  by  the  charter 
the  banking  house  is  to  be  located.  Without  express  authority 
a  banking  corporation  has  not  power  to  establish  a  branch 
bank.^^  Under  charters  and  statutes  authorizing  branches  they 
are  usually  not  distinct  corporations,^ ^  but  mere  agencies  of 
the  parent  bank,  although  sometimes  they  have  had  separate 
corporate  existence.^* 

The  National  Bank  Act  authorizes  state  banks  having 
branches,  the  capital  being  joint,  to  become  national  banks, 
and  to  retain  the  branches,  subject  to  certain  restrictions.^^ 

Foreign  Baulking  Corporations 

While  a  banking  corporation  may  by  its  agents  enter  into 
certain  contracts  and  perform  certain  acts  in  a  state  other  than 

20  See  State  v.  Ashley,  1  Ark.  513;  People  ex  rel.  Stlckney  v.  Mar- 
shall, 6  111.  G72 ;  Farmers'  Bank  v.  Garteu,  34  Mo.  119 ;  State  ex  rel. 
Flunierfelt  v.  Engle,  50  Wash.  207,  96  Pac.  1045.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  33;  Cent.  Dig.  §§  39,  J,0. 

21  See  Bowman  v.  Cecil  Bank,  3  Grant,  Cas.  (Pa.)  33.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  33;  Cent.  Dig.  §§  39,  JfO. 

2  2  Bruner  v.  Citizens'  Bahk  of  Shelby ville,  134  Ky.  283,  120  S.  W. 
345.  See,  also,  People  ex  rel.  Piatt  v.  President,  etc.,  of  Oakland 
County  Bank,  1  Doug.  (Mich.)  282.  See  ''Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  S3;  Cent.  Dig.  §§  39,  40. 

2  3  See  Wallace  v.  State  Bank,  7  Ark.  61;  Bank  of  Montreal  v. 
Clark,  108  111.  ^pp.  163 ;  Farmers'  Bank  of  Kentucky  v.  Calk,  4  Ky. 
Law  Rep.  617 ;  Union  Bank  v.  Dunn,  17  La.  234 ;  Merchants'  Bank  of 
St.  Louis  V.  Farmer,  43  Mo.  214 ;  Worth  v.  Bank  of  Hanover,  122  N. 
C.  397,  29  S.  E.  775 ;  Mason  v.  Farmers'  Bank  at  Petersburg,  39  Va. 
84.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  33;  Cent.  Dig. 
§§  39,  JfO. 

24  See  :\IcXeil  v.  Wyatt,  3  Humph.  (Tenn.)  125;  Bank  of  Tennessee 
V.  Burke'  1  Cold.  (Tenn.)  623.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  %  33;  Cent.  Dig.  §§  39,  J,0. 

2  5  Rev.  St.  U.  S.  §  5155  (U.  S.  Comp.  St.  1901,  p.  346). 


§    69)  PLACE    OF   TRANSACTING    BUSINESS  273 

that  by  which  it  was  created,-^  like  any  other  corporation  it  can 
do  so  only  with  the  consent  of  the  state  where  it  so  acts.  A 
state  may  exclude  a  foreign  corporation  altogether,^^  may  im- 
pose such  terms  as  it  sees  fit  as  a  condition  of  allowing  the 
corporation  to  do  business.*^  Some  states  have  passed  statutes 
prohibiting  foreign  banking  corporations  from  engaging  in 
the  banking  buS'iness.  These  statutes  in  terms  or  by  construc- 
tion apply  only  to  the  business  of  receiving  deposits  and  making 
discounts,  or  to  keeping  an  office  for  that  purpose, ^^  and  it 
is  not  generally  a  violation  of  the  statute  to  engage  in  an 
isolated  transaction,  as  to  lend  money  and  to  take  security 
therefor,  or  to  discount  a  bill.^^  Similarly  under  statutes  re- 
quiring foreign  corporations  to  comply  with  certain  conditions 
before  transacting  business,  it  is  usually  held  that  a  single 
transaction,  as  the  purchase  of  a  note,  does  not  bring  the  cor- 
poration within  the  statute.^" 

2  6  Ante,  p.  270. 

27  Paul  V.  Virginia,  8  Wall.  168,  19  L.  Ed.  357;  Clark,  Corp.  (2cl 
Ed.)  602  et  seq. 

Banking  corporations  are  not  within  the  act  authorizing  foreign 
coi'porations  to  transact  business  in  the  state.  New  York  Mortgage 
Co.  V.  Secretary  of  State,  150  Mich.  197,  114  N.  W.  82.  See  ''Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §  IS;  Cent.  Dig.  §§  23,  2//. 

2  8  Taylor  v.  Bruen,  2  Barb.  Ch.  (N.  Y.)  .301 ;  Bowman  v.  Cecil  Bank, 
3  Grant,  Cas.  (Pa.)  33.    ' 

So  on  ground  of  public  policy.  Bank  of  Marietta  v.  Pindall,  23  Va. 
465.  See,  also.  Bank  of  Newberry  v.  Stegall,  41  Miss.  142.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  18;  Cent.  Dig.  §§  23,  2/t; 
"Corporations,''  Dec.  Dig.  (Key  No.)  §  6.36;  Cent.  Dig.  §§  2505-2509. 

2  9  See  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370;  Suy- 
dam  V.  Morris  Canal  &  Banking  Co.,  cited  5  Hill  (N.  Y.)  491,  note; 
Id.,  6  Hill  (N.  Y.)  217;  Pickaway  County  Bank  v.  Prather,  12  Ohio 
St.  497;  Kennedy  v.  Knight,  21  Wis.  340,  94  Am.  Dec.  543.  See 
"Banks  and  Banking,"  Dee.  Dig.  (Key  No.)  §  18;  Cent.  Dig.  §§  23,  2-',. 

3  0  Commercial  Bank  v.  Sherman,  28  Or.  573,  43  Pa«  658,  .52  Am. 
St.  Rep.  811.  Cf.  State  v.  iEtna  Banking  &  Trust  Co.,  34  Mont.  379, 
87  Pac.  268.     See  Clark,  Corp.  (2d  Ed.)  614. 

Bringing  an  action  is  not  doing  business.     Citizens'  State  Bank  v. 

TIFF.BKS.&  B.— IS      ' 


274  BANKING  CORPORATIONS  (Ch.  9 

CAPITAL  STOCK 

70.  Banking  corporations,  except  savings  banks,  usually 
have  a  capital  stock,  and  membership  in  the  cor- 
poration, with  its  resulting  rights  and  obligations, 
is  determined  by  ownership  of  the  shares  thereof. 

The  questions  arising  here  are  for  the  most  part  questions 
of  general  corporation  law,  and  do  not  distinctively  concern 
banking  corporations,  except  so  far  as  the  law  is  affected  by 
particular  statutes  and  charters  governing  banking  corpora- 
tions, and  it  would  not  be  possible  to  treat  of  them  without 
entering  fully  into  the  field  of  corporations.  For  the  law  as 
a  whole  relating  to  the  capital  stock,  including  subscription  to 
and  issue  of  the  stock,^^  increase  and  reduction  of  the  stock,^- 
the  rights  incident  to  membership,^ ^  the  transfer  of  the  stock 
and  the  corporation's  lien  on  the  shares  for  debts  due  from  the 
stockholders,^*  the  liability  of  the  stockholders  for  the  corpo- 
rate debts  and  the  enforcement  thereof,^ ^  and  kindred  matters, 
the  reader  must  consult  the  books  upon  corporations  and  the 
statutes  of  the  several  states. 

Cowles,  89  App.  Div.  281,  86  N.  Y.  Supp.  38;  Western  Nat.  Bank  v. 
Kelly,  48  Misc.  Rep.  366,  95  N.  Y.  Supp.  574.  See  "Banks  and  Bank- 
ing;' Dec.  DUj.  (Key  A"o.)  §  18;  Cent.  Dig.  §§  2S,  24;  "Corporations," 
Dec.  Dig.  {Key  Wo.)  §  6't2;  Cent.  Dig.  §§  2520-2527. 

31  See  Clark,  Corp.  (2d  Ed.)  c.  10;    post,  p.  .368. 

3  2  Clark,  Corp.  (2d  Ed.)  346;    post,  pp.  369.  372. 

33  Clark,  Corp.  (2d  Ed.)  c.  11;    post,  p.  378. 

34aark,  Corp.  (2d  Ed.)  c.  12;    post,  pp.  375,  377. 

3  5  Clark,  Corp.  (2d  Ed.)  e.  14;   post,  p.  381. 


§    71)  roWEU   AS   TO    CONTRACTS  275 

POWER  AS  TO  CONTRACTS 

71.  A  banking  corporation  has  no  power  to  enteFinto  any 
contract  that  is  not  expressly  or  impliedly  author- 
ized by  its  charter.  But  any  contract  that  is  rea- 
sonably necessary  or  proper  for  carrying  out  the 
powers  expressly  conferred  is  impliedly  authorized. 

In  General 

The  principal  banking  functions  of  receiving  deposits," 
making  collections,^'^  making  loans  and  discounts  ^^  and  issuing 
circulating  notes,^°  have  already  been  considered.  The  power 
to  exercise  these  functions  is  usually  expressly  conferred  upon 
banking  corporations,  although  the  power  to  make  collections 
is  usually  conferred  by  implication,  as  being  a  proper  incident 
of  the  business  of  banking.  Certain  other  dealings  and  con- 
tracts remain  to  be  considered.  The  questions  involved  for  the 
most  part  concern  the  powers  of  incorporated  banks,  for  pri- 
vate bankers,  unless  restrained  by  statute,  have  the  same  right 
as  other  individuals  to  enter  into  such  contracts  as  they  may 
see  fit. 

Express  and  Incidental  Poivers 

A  banking  corporation,  like  other  corporations,  has  such 
powers  only  as  are  conferred  upon  it  by  its  charter  or  by  the 
law  of  its  incorporation ;  but  powers  may  be  conferred  by  im- 
plication as  well  as  expressly.  Certain  powers,  such  as  the 
power  to  contract  for  authorized  purposes,  to  sue  and  be  sued, 
to  have  a  common  seal,  and  to  make  by-laws,  are  impliedly 
conferred  as  incidental  to  corporate  existence.*"  But,  beyond 
thjs,  corporations  have  all  powers  which  are  reasonably  neces- 
sary or  proper  for  the  execution  of  the  powers  expressly' 
granted  and  which  are  not  expressly  or  impliedly  excluded.*^ 
Most  of  the  powers  to  be  considered  in  the  present  chapter 
''are  of  this  character.  ' 

ae.'inte,  p.  11.  38  Ante.  p.  225.        4o  Clnrk.  Corp.  ^2rl  Ed.)  114. 

3T  Ante,  p.  1S9.         39  Ante.  p.  256.         4i  Clark,  Corp.  (1^  Ed.)  115. 


•_>7G  BANKING  CORPORATIONS  (Ch.  9 


BUYING  AND  SELLING  PROPERTY 

72.  As  a  rule,  a  banking  corporation  has  power  to  purchase 
such  property  as  is  necessary  for  its  accommoda- 
tion in  the  conduct  of  its  business,  but  not  to  buy 
and  sell  property  (other  than  exchange,  coin  and 
bullion,  and  commercial  paper),  except  in  so  far  as 
the  acquisition  and  sale  is  incidental  to  the  taking 
and  enforcement  of  collateral  security  and  to  the 
payment,  settlement,  and  collection  of  debts  pre- 
viously contracted. 

In  General 

It  is  not  a  function  of  a  bank  to  buy  property  for  the  pur- 
pose of  selling  at  a  profit.  The  business  of  banking  in  this 
respect  is  properly  confined  to  buying  and  selling  exchange, 
coin  and  bullion,  and  negotiable  paper.-* ^  The  acquisition  and 
sale  of  various  kinds  of  property  is,  however,  a  proper  incident 
to  the  business  of  banking,  when  the  property  is  acquired  in 
enforcing  and  realizing  upon  collateral  security,*^  or  in  settle- 
ment or  payment  of  an  existing  debt  and  to  save  itself  from 
loss,**  or  by  levy  and  sale  under  a  judgment  for  a  debt.*^ 

4  2  Under  power  to  buy  and  sell  negotiable  paper,  a  bank  maj-  buy 
and  sell  bonds.  Mt.  Vernon  Bank  v.  Porter,  52  Mo.  App.  244.  See, 
also,  Newport  Nat.  Bank  v.  Board  of  Education  of  Newport,  114  Ky. 
87.  70  S.  W.  186;  ante,  p.  227.  See  "Banks  and  Banlcing,"  Dec.  Dig. 
{Key  Vo.)  §  86;  Cent.  Dig.  §  218. 

4  3  Bates  V.  Bank  of  State,  2  Ala.  451;  Commercial  Bank  of  Man- 
chester V.  Nolan,  8  Miss.  508;  First  Nat.  Bank  of  Parker  v.  Peavy 
Elevator  Co.,  10  S.  D.  167,  72  N.  W.  402 ;  ante.  p.  246.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§  9^-95;  Cent.  Dig.  §§  221-230: 

4  4  Reynolds  v.  Simpson,  74  Ga.  454;  Brown  v.  Hogg,  14  111.  219; 
First  Nat.  Bank  of  Great  Bend  v.  Bannister,  7  Kan.  App.  787,  54 
Pac.  20;  Bank  of  North  America  v.  Tamblyn,  7  Mo.  App.  571;  ante, 
p.  2!48;  post,  p.  280.  See  "Banks  and  Banking,"  Deo.  Dig.  (Keif  ^'o^ 
§§  9J,-96;  Cent.  Dig.  §§  227-2S0. 

4  5  Ameriran  Nat.  Bank  v.  National  Wall  Paper  Co.,  77  Fed.  85,  2.3 
C.  C.  A.  3.1;  Farmers'  &  Millers'  Bank  of  Milwaukee  v.  Detroit  &  M. 


§    72)  BUYING    AND   SELLING    PROPEIiTY  277 

Exchange,  Coin,  and  Bullion 

The  buying  and  selling  of  exchange — that  is,  bills  of  ex- 
change—  is  properly  incidental  to  the  business  of  bauliing,  and, 
it  seems,  is  authorized  under  a  general  grant  of  banking  pow- 
ers. The  power  of  buying  and  selling  exchange,  coin,  and 
bullion  is  expressly  conferrc«l  upon  national  banks.''® 

Stock  in  Other  Corporations 

It  is  generally  held  in  this  country  that  a  corporation  has  no 
power  to  subscribe  for  or  to  purchase  stock  in  another  cor- 
poration, unless  such  power  is  expressly  granted  in  its  charter 
or  is  reasonably  implied  in  it.*^  This  rule  applies  to  banks. *^ 
Thus  the  power  to  purchase  or  deal  in  stock  of  another  cor- 
poration is  not  expressly  conferred  upon  national  banks,  and 
it  is  held  that  it  is  not  an  act  which  may  be  exercised  as  in- 
cidental to  the  powers  expressly  conferred.*^  As  incidental  to 
the  power  to  loan  money,  however,  national  banks,  and  other 
banking  corporations  having  like  powers,^"  may  accept  stock 
as  collateral,  and  by  enforcement  of  their  rights  become  owner 

R  Co..  17  Wis.  372 ;  uute,  p.  251 ;  post,  p.  280.  See  "Banks  and 
Banking;'  Dec.  Dig.  (Key  No.)  §§  9J,-96;  Cent.  Dig.  §§  227-230. 

■46  Rev.  St.  U.  S.  §  5136  (U.  S.  Comp.  St.  1901,  p.  3455). 

4  7  Clark,  Corp.  (2d  Ed.)  145. 

48  Preston  v.  INIarqiiette  County  Sav.  Bank,' 122  Mich.  696,  81  N.  W. 
920;  Bank  of  Commerce  v.  Hart.  37  Neb.  197,  55  N.  W.  63V20  L.  R. 
A.  780.  40  Am.  St.  Rep.  479;  Talmage  v.  Pell,  7  N.  Y.  328;  Nassau 
Bank  v.  Jones,  95  N.  Y.  135,  47  Am.  Rep.  14.  '  But  see  Latimer  v. 
Citizens'  State  Bank,  102  Iowa,  162,  7l  N.  W.  225  (holding  a  bank 
authorized  under  power  to  "discount  bills,  notes,  and  other,  securi- 
ties"). See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  92;  Cent. 
Dig.  §  226;  "Corporations;'  Dec.  Dig.  (Key  No.)  §  377;  Cent.  Dig. 
§§  1531-1534. 

4  9  California  Nat.  Bank  v.  Kennedy,  167  U.  S.  362,  17  Sup.  Ct.  831, 
42  L.  Ed.  198.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§ 
260,  261. 

5  0  See  Deposit  Bank  of  Owensborough  v.  Barrett  (Ky.)  13  S.  W. 
337.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  92,  260;  Cent. 
Dig.  §  226. 


278  BANKING  CORPORATIONS  (Ch.  9 

of  the  collateral,"  or  may  take  stock  in  payment  or  compromise 
of  doubtful  debts,  in  order  to  avoid  loss  and  with  a  view  to 
converting  the  stock  into  money. ®^ 

While  the  purchase  of  stock,  not  as  incidental  to  the  banking 
business,  is  ultra  vires,  so  that  it  would  be  open  to  the  state  to 
proceed  against  the  bank  for  violation  of  its  charter,  or  for 
stockholders  to  restrain  such  violation,  it  wouldl  seem  that  a 
purchase  is  not  void."^^  Under  the  extreme  doctrine  of  ultra 
vires  asserted  by  the  Supreme  Court  of  the  United  States, 
however,  it  is  held  that  such  a  purchase  is  void,  and  conse- 
quently cannot  be  ratified,  and  that  the  bank,  when  sued  as 
a  stockholder,  is  not  estopped  to  deny  its  liability  for  the  debts 
of  such  corporation,  though  it  has  received  dividends  on  the 
stock.^*    Yet  it  has  been  held  that,  while  the  obligation  of  an 

51  Ante,  p.  248. 

5  2  First  Nat.  Bank  v.  National  Exchange  Bank,  92  U.  S.  122,  23  L. 
Ed.  679;  Westminster  National  Bank  v.  New  England  Electrical 
Works,  73  N.  H.  465,  62  Atl.  971,  3  L.  R.  A.  (N.  S.)  551,  111  Am.  St. 
Rep.  637 ;  Tourtelot  v.  Whithed,  9  N.  D.  407,  84  N.  W.  8.  See,  also, 
California  Bank  v.  Kennedy,  167  U.  S.  362,  17  Sup.  Ct.  831,  42  L.  Ed. 
198. 

It  is  ultra  vires  to  take  stock  in  a  corporation  engaged  in  the  spec- 
ulative business  of  buying  and  selling  the  shares  of  an  insolvent  cor- 
poration, with  power,  but  without  oldigation,  to  engage,  as  an  inde- 
pendent enterprise,  in  a  manufacturing  business,  though  the  sjiares 
be  taken  in  exchange  for  a  claim  against  the  corporation.  First 
Nat.  Bank  v.  Converse,  200  U.  S.  425,  26  Sup.  Ct.  306,  50  L.  Ed.  537. 
See  "Banks  and  Banking,''  Dec.  Di(j.  {Key  No.)  §§  92,  260;  Cent.  Dig. 
§  226. 

53  See  Hunt  v.  Hauser  Malting  Co.,  90  Minn.  282,  96  N.  W.  85 ;  Id., 
95  Minn.  206,  103  N.  W.  1032.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §§  92,  260;  Cent.  Dig.  §  226. 

54  California  Nat.  Bank  v.  Kennedy,  107  U.  S.  .362,  17  Sup.  Ct.  S31, 
42  L.  Ed.  198;  Shaw  v.  National  German-American  Bank,  132  Fed. 
658,  65  C.  C.  A.  620;  affirmed  199  U.  S.  603,  26  Sup.  Ct.  750,  50  L. 
Ed.  328;  Chemical  Nat.  Bank  v,  Haverraale,  120  Cal.  601,  52  Pac. 
1071,  65  Am.  St.  Rep.  206.  See,  also,  Schofield  v,  Goodrich  Bros. 
Banking  Co.,  98  Fed.  271,  39  C.  C.  A.  76. 

A  national  bank  is  without  power  to  purchase,  as  an  investment, 
with  its  surplus  funds,  and  to  hold,  shares  of  another  national  bank. 


§    72)  BUYING    AND    SELLING    PROPERTY  279 

ultra  vires  contract,  whether  executed  or  executory,  is  void, 
the  fact  that  the  purchase  of  stock  was  ultra  vires  does  not 
prevent  the  bank  from  getting  title  to  the  stock."-*-* 

Bank's  Own  Stock 

Some  state  banks  are  prohibited  from  purchasing  their  own 
stock,^^  while  others-  are  not  so  prohibited."  In  the  absence 
of  restriction,  a  bank  may  take  its  own  stock  for  a  past  debt,'^ 
and  this  power  is  sometimes  expressly  conferred. °°  A  national 
bank  is  prohibited  from  becoming  a  purchaser  or  holder  of  the 
shares  of  its  own  capital  stock,  unless  such  purchase  shall  be 
necessary  to  prevent  loss  upon  a  debt  previously  contracted  in 
good  faith.®"  An  unauthorized  purchase  however,  is  not  void, 
and  its  illegality  can  be  attacked  only  by  the  government.®^ 

and  though  it  has  received  dividends  on  such  shares,  it  is  not  es- 
topped to  plead  the  unlawfulness  as  a  defense  in  an  action  by  the 
receiver  of  the  second  bank  to  collect  an  assessment  thereon  by  the 
comptroller.  First  Nat.  Bank  v.  Hawkins,  174  U.  S.  3G4,  It)  Sup.  Ct. 
739,  43  L.  Ed.  1007.  See  "Banks  and  BanMng,"  Dec.  Dig.  {Key  No.) 
§§  101,  261;  Cent.  Dig.  §§  237,  238. 

5  5  Metropolitan  Trust  Co.  v.  McKinnon,  172  Fed.  846,  97  C.  C.  A. 
194.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  101,  261; 
Cent.  Dig.  §§  237,  238. 

56  See  German  Sav.  Bank  v.  Wulfekuhler,  19  Kan.  60. 

As  to  the  power  of  corporations  in  general,  see  Clark,  Corp.  (2d 
Ed.)  14S.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  91;  Cent. 
Dig.  §  225. 

5  7  See  Kassler  v.  Kyle,  28  Colo.  374,  65  Pac.  34 ;  Robison  v.  Beall, 
26  Ga.  17;  Farmers'  &  Mechanics'  Bank  v.  Champlain  Transp.  Co., 
18  Vt.  131.  See  "Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §  91; 
Cent.  Dig.  §  225. 

58  Draper  v.  Blackwell,  138  Ala.  182,  35  South.  110;  Taylor  v. 
Miami  Exporting  Co.,  6  Ohio  177.  See  "Banks  and  Banking,"  Dec. 
Dig.   {Key  No.)  §  91;  Cent.  Dig.  §  225. 

5  9  St.  Paul  &  M.  Trust  Co.  v.  Jenks,  .57  Minn.  248,  59  N.  W.  299. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  91;  Cent.  Dig.  §  2,25. 

6  0  Ante,  p.   249. 

61  Lantry  v.  Wallace,  182  U.  S.  536,  21  Sup.  Ct.  878,  45  L.  Ed.  1218 
(holding  a  subsequent  sale  by  the  bank  lawful,  and  the  buyer  liable 
as  a  shareholder) ;  Wallace  v.  Hood  (C.  C.)  89  Fed.  11 ;  Id.,  97  Fed. 


280  BANKING  CORrORATIONS  (Cll.  9 

Real  Estate 

Unless  expressly  authorized  a  banking  corporation  has  no 
power  to  purchase  real  estate  to  sell  again. •^-  Power  to  pur- 
chase enough  for  a  banking  house  is  often  expressly  conferred, 
and  would  doubtless  be  implied, ''^^  and  incidentally  to  this 
power  a  bank  may  erect  a  building  larger  than  necessary  for 
its  requirements  and  lease  space  in  it  to  others.*'*  It  may  buy 
and  hold  real  estate  under  any  mortgage  that  it  is  authorized 
to  take,*'^  aqd  under  sale  and  levy  upon  execution,®*'  and  may 
take  real  estate  in  settlement  or  payment  of  a  claim  or  debt,  or 
to  secure  or  save  a  debt."  It  may,  of  course,  sell  land^  so 
acquired."*    Even  if  a  bank  purchase  land  for  an  unauthorized 

983,  38  C.  C.  A.  692,  affirmed  182  U.  S.  555,  21  Sup.  Ct.  885,  45  L.  Ed. 
1227.  See,  also,,  Johnston  v.  Laflin,  103  U.  S.  800,  26  L.  Ed.  532 ; 
First  Nat.  Bank  v.  Stewart,  107  U.  S.  676,  2  Sup.  Ct.  778,  27  L.  Ed. 
592.  See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  101;  Cent. 
Dig.  §§  237,  23S. 

62  Metropolitan  Bank  v.  Godfrey,  23  111.  579;  Thweatt  v.  Bank  of 
Hopkinsville,  81  Ky.  1 ;  Bank  of  Michigan,  President,  etc.,  of  v.  Niles, 
1  Doug.  (^lich.)  401,  41  Am.  Dec.  575.  See  ''Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  95;  Cent.  Dig.  §§  228,  229. 

63  Clark,  Corp.  (2d  Ed.)  119. 

64  Banks  v.  Poitiaux,  24  Va.  136,  15  Am.  Dec.  706;  post,  note  281. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  95;  Cent.  Dig.  §§ 
228,  229. 

6  5  Ante,  p.  250. 

66  See  Martin  v.  Branch  Bank  of  Decatur.  15  Ala.  587,  50  Am.  Dec. 
147 ;  Sherry  v.  Denn  ex  dem.  State  Bank  of  Indiana,  8  Blackf.  (lud.) 
542;  INIerchants'  Bank  of  St.  Louis  v.  Harrison,  39  Mo.  43;3,  93  Am. 
Dec.  285.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  95;  Cent. 
Dig.  §§  228,  229. 

67  Brown  v.  Bradford,  103  Iowa,  378,  72  N.  W.  648;  'State  Security 
Bank  v.  Hoskins  130  Iowa,  339,  106  N.  W.  764,  8  L.  R.  A.  (N.-  S.)  376 ; 
Thoniaston  Bank  v.  Stiuipson.  21  Me.  195;  Missouri  State  Bank  v. 
South  St.  Louis  Foundry,  145  Mo.  App.  257,  129  S.  W.  433.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  95;  Cent.  Dig.  §§  228, 
229. 

6  8  Jackson  v.  Brown,  5  Wend.  (N.  Y.)  590;  Talraan  v.  Rochester 
City  Bank,  18  Barb.  (N.  Y.)  123  (with  covenants  of  warranty).     See 


§    72)  BUYING    AND    SELLING   PROPERTY  281 

purpose,  however,  it  is  generally  held  that  it  acquires  and  can 
convey  good  title ;  the  (|uestion  as  to  the  legality  of  the  trans- 
action being  solely  between  the  bank  and  the  state.^ 

By  the  terms  of  the  National  Bank  Act,''"  a  national  bank 
may  purchase,  hold,  and  convey  real  estate  for  certain  pur- 
poses, viz.:  (1)  Such  as  shall  be  necessary  for  its  immediate 
accommodation  in  the  transaction  of  its  business;  ''^  (2)  such  as 
shall  be  mortgaged  to  it  in  good  faith  by  way  of  security  for 
debts  previously  contracted  ;''-  (3)  such  as  shall  be  conveyed  to 
it  in  satisfaction  of  debts  previously  contracted  in  the  course  of 

'•liatiJcs  and  Hanking,"  Dec.  Dig.  {Keg  No.)  §  95;  Cent.  Dig.  §§  228, 
229. 

69  Litchfield  v.  Prestou,  OS  Va.  530,  37  S.  E.  6 ;  ante,  p.  251,  Sec 
"Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  95;  Cent.  Dig.  §§  228, 
229. 

7  0  Rev.  St.  U.  S.  §  5137  (U.  S.  Comp.  St.  1901,  p.  3400). 

"1  This  power  includes  the  power  to  lease,  and  a  bank  does  not 
exceed  its  powers  by  leasing  ground  for  90  years  under  an  agreement 
with  the  owner  that  he  will  erect  a  building  for  its  use.  The  bank 
may  improve  the  land  as  any  other  prudent  owner  would  do,  and  is^ 
not  limited  to  a  building  only  sufficient  for  its  own  use.  Brown  v. 
Schleier,  118  Fed.  981,  55  C.  C.  A.  475.  affirmed  194  U.  S.  18,  24  Sup. 
Ct.  558,  48  L.  Ed.  857.  Cf.  McCormick  v.  Market  Nat.  Bank,  165  U. 
S.  538,  17  Sup.  Ct.  433,  41  L.  Ed.  817.  See,  also.  Weeks  v.  Interna- 
tional Trust  Co.,  125  Fed.  370,  60  C.  C.  A.  236. 

It  may  enlarge  its  building  for  lietter  accommodation  of  its  busi- 
ness, and  at  the  same  time  provide  offices  to  be  rented.  Wingert  v. 
First  Nat.  Bank  of  Hagerstown,  Md.,  175  Fed.  739,  99  C.  C.  A.  315. 

It  may  Make  a  contract  to  prevent  the  erection  of  buildings  on 
adjacent  land  so  as  to  secure  light  and  air.  First  Presbyterian 
Church  V.  National  State  Bank,  57  N.  J.  Law,  27,  29  Atl.  320;  Id.,  58 
N.  J.  Law,  406,  36  Atl.  1129.  See  ''Banks  and  Ba,nking,"  Dec.  Dig. 
{Keij  No.)  §  259;  Cent.  Dig.  §§  9S0-9S2. 

T2  Cockrell  v.  Abeles,  86  Fed.  505,  30  C.  C.  A.  223;  Cooper  v.  Hill, 
94  Fed.  582,  36  C.  C.  A.  402. 

Holding  a  second  mortgage,  it  ni;iy  buy  in  a  first  to  protect  its  in- 
terest.    Holmes  v.  Boyd,  90  Ind.  332. 

A  bank,  which  has  taken  a  deed  of  trust  to  secui'e  a  previous  loan, 
and  bought  the  laud  on  foreclosure,  may  cut  and  sell  the  timber 
thereon.     Roebliug   v.    First   Nat.    Bank    (D.   C.)   30   Fed.   744.     See 


282  ^  BANKING   CORPORATIONS  (Ch.  9 

its  dealings;'"  and  (4)  such  as  it  shall  purchase  under  judg- 
ments, decrees,  or  mortgages  held  by  it,  or  shall  purchase  to 
secure  debts  due  to  it.^^  The  act  also  provides  that  banks  may 
purchase,  hold  and  convey  only  for  the  purposes  named,  and 
that  no  bank  shall  hold  possession  of  any  real  estate  under 
mortgages,  or  the  title  and  possession  of  any  real  estate  pur- 
chased to  secure  any  debts  due  to  it,  for  a  longer  period  than 
five  years.  As  we  have  seen,  however,  an  objection  to  the  tak- 
ing of  a  mortgage  not  authorized  under  the  above  provisions 
can  be  urged  only  by  the  government."^  Neither  can  an  objec- 
tion to  the  title  to  real  estate  purchased  by  a  bank,  although  for 
an  unauthorized  purpose,  be  urged  by  any  one  except  the  gov- 
ernment.'^® 

BORROWING  MONEY 

73.  Unless  expressly  restricted  or  limited,  a  banking  cor- 
poration has  power  to  borrow  money,  whenever  in 
the  conduct  of  its  business  it  is  necessary  or  ex- 
pedient to  do  so,  and  to  execute  notes  and  other 
evidences  of  indebtedness  therefor, 

"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  259;  Cent.  Dig.  §§  980- 
982. 

73  Turner  v.  First  Nat.  Bank  of  Madison,  78  Ind.  19. 

It  may  pay  the  excess  in  value  over  the  debt.  Libby  v.  Union  Nat. 
Bank,  99  111.  622.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
259;  Cent.  Dig.  §§  980-982. 

7  4  Mapes  V.  Scott,  88  111.  352;  Upton  v.  National  Bank  of  South 
Reading,  120  Mass.  153;  Wherry  v.  Hale,  77  Mo.  20.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  259;  Cent.  Dig.  §§  980-9S2. 

7  5  Ante,  p.  251. 

7  6  Reynolds  v.  First  Nat.  Bank,  112  U.  S.  405,  5  Sup.  Ct.  213,  28 
L.  Ed.  733;  Kerfoot  v.  Farmers"  &  M.  Bank,  218  U.  S.  2S1,  31  Sup.  Ct. 
14,  54  L.  Ed.  1042 ;  Brown  v.  Schleier,  118  Fed.  981,  55  C.  C.  A.  475 ; 
Mapes  V.  Scott,  94  111.  379;  De  Witt  County  Nat.  Bank  v.  Mickel- 
berry,  244  111.  77,  91  N.  E.  86,  135  Am.  St.  Rep.  304 ;  Wherry  v.  Hale, 
77  Mo.  20 ;  Hall  v.  Farmers'  &  Merchants'  Bank.  145  Mo.  418.  4i\  S. 
W.  1000.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  95,  259; 
Cent.  Dig.  §§  228,  229,  980-982. 


§    73)  BORROWING    MONEY  283 

Except  so  far  as  there  may  be  express  restrictions  in  the 
charter/^  a  corporation  lias  power  to  borrow  money  whenever 
the  nature  of  its  business  renders  it  proper  or  exp^jent.'^^  It 
follows  that  a  banking  corporation  with  general  powers  may 
borrow  money  J®  and  that  it  may  give  its  bonds,  notes,  or  other 
evidences  of  debt  therefor.'"'  Thus  the  power  to  borrow  money 
is  not  expressly  given  by  the  national  banking  act,  but  the  pow- 
er is  recognized  as  incidentally  conferred. ^^ 

National  banks  are  prohibited  from  being  at  any  time  in- 
debted or  in  any  way  liable  to  an  amount  exceeding  the  amount 
of  their  capital  stock  paid  in  and  remaining  undiminished,  ex- 
cept on  notes  of  circulation,  deposits  and  collections,  bills  of 
exchange  and  drafts  drawn  against  money  actually  on  deposit 
to  their  credit,  and  liabilities  to  stockholders  for  dividends  and 

7  7  See  Commonwealth  v.  Bank  of  Mutual  Redomiition,  4  Allen 
(JIass.)  1.  See  ''Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  97; 
Cent.  Dig.  §  231;  "Corporations,"  Dec.  Dig.  {Key  No.)  §  J/GO;  Cent. 
Dig.  §  181S. 

7  8  Clark,  Corp.  (2d  Ed.)  136. 

7  9  Ward  V.  Johnson,  95  111.  215;  Tuttle  v.  National  Bank  of  Re- 
public, 48  111.  App.  481 ;  Harris  v.  Randolph  County  Bank,  157  Ind. 
120,  60  N.  E.  1025 ;  Deposit  Bank  of  Carlisle  v.  Fleming  (Ky.)  44  S. 
W.  961 ;  Donnell  v.  Lewis  County  Sav.  Bank,  80  Mo.  165 ;  Ringling  v. 
Kohn,  6  Mo.  App.  33.3;  Leavitt  v.  Yates,  4  Edw.  Ch.  (N.  Y.)  134; 
Barnes  v.  Ontario  Bank,  19  N.  Y.  152.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  97;  Cent.  Dig.  §  221. 

8  0  Curtis  V.  Leavitt,  17  Barb.  (N.  Y.)  309;  Id.,  15  N.  Y.  9.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  97;  Cent.  Dig.  §  231. 

81  Auten  V.  United  States  Nat.  Bank,  174  U.  S.  125,  19  Sup.  Ct.  628. 
43  L.  Ed.  920.  See,  also.  Western  Nat.  Bank  v.  Armstrong,  152  U. 
S.  346,  14  Sup.  Ct.  572,  38  L.  Ed.  470 ;  Aldrich  v.  Chemical  Nat.  Bank, 
176  U.  S.  61S,  20  Sup.  Ct.  41)8,  44  L.  Ed.  611 ;  Hanover  Nat.  Bank  v. 
First  Nat.  Bank  of  Burlingame,  Kan.,  109  Fed.  421,  48  C.  C.  A.  482. 

Notes  given  by  a  bank,  when  embarrassed  by  pressing  demands, 
in  part  consideration  of  the  assumption  by  the  payee  of  all  its  out- 
standing obligations,  secured  by  a  pledge  of  all  its  assets  remaining 
after  turning  over  cash  and  such  bills  receivable  as  the  payee  would 
accept  at  par,  are  its  valid  obligations,  enforceable  against  its  stock- 
bolclers  after  voluntary  liquidation.     Wyman  v.  Wallace,  201  U.  S. 


>84 


BAN-KING   CORPORATIONS  (Ch.  9 


reserved  profits.^^  Notwithstanding  this  prohibition,  an  in- 
debtedness incurred-  by  a  national  bank  in  the  exercise  of  any 
of  its  authorized  powers,  and  for  which  it  has  received  and 
retains  the  consideration,  is  not  void  because  the  indebtedness 
surpasses  the  prescribed  limit.^^ 

GUARANTY  AND  SURETYSHIP 

74.  Unless  expressly  authorized,  a  banking  corporation  has 
not  power  to  enter  into  a  contract  of  guaranty  or 
suretyship,  except  when  such  contract  is  for  its 
own  advantage,  as  an  incident  to  a  contract  or 
transaction  which  is  within  its  express  or  implied 
powers.  It  has  no  power  to  make  accommodation 
paper. 

Guaranty, 

In  the  absence  of  an  express  grant  of  authority,  a  banking 
corporation,  as  a  rule,  has  not  the  power  to  become  the  guar- 
antor or  surety  of  the  obligation  of  another  person,  or  to 
lend  its  credit  to  any  person.^*     No  such  power  being  con- 

230.  26  Sup.  Ct.  49.5.  50  L.  Ed.  738.  See  "Banlcs  and  Banlcing,"  Dec. 
Dig.  (Key  No.)  §§  97,  258;  Cent.  Dig.  ^  231. 

82  Rev.  St.  U.  S.  §  5202  (U.  S.  Comp.  St.  1901,  p.  3494). 

8  3  Weber  v.  Spokane  Nat.  Bauk,  64  Fed.  208,  12  C.  C.  A.  93.  See, 
also,  Brown  v.  Schleier  (C.  C.)  112  Fed.  577;  Id.,  118  Fed.  981,  55 
C.  C.  A.  475 ;  affirmed  194  U.  S.  18,  24  Sup.  Ct.  558,  48  I>.  Ed.  8-57 ; 
Stephens  v.  Monongabela  Bauk,  88  Pa.  157,  32  Am.  Rep.  438.  See 
"Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  101,  261;  Cent.  Dig.  §§ 
257,  238,  991-1000. 

84  Sellgman  v.  Charlottesville  Nat.  Bank,  Fed.  Cas.  No.  12,042,  3 
Hughes,  647;  Commercial  Nat.  Bank  v.  Pirie,  82  Fed.  799,  27  C. 
C.  A.  171 ;  Bowen  v.  Needles  Nat.  Bank,  94  Fed.  925,  36- C.  C.  A.  553 ; 
Merchants'  Nat.  Bank  v.  Baird.  160  Fed.  042,  90  C.  C.  A.  338.  17  L. 
R.  A.  (N.  S.)  526 ;  Barron  v.  McKinnon  (C.  C.)  179  Fed.  759 ;  Thilniany 
V.  Iowa  Paper  Bag  Co.,  108  lowa,  333,  79  N.  W.  68;  Norton  v.  Derry 
Nat.  Bank,  61  N.  H.  589,  60  Am.  Rep.  334 ;  Ayer  v.  Hughes,  87  S.  C. 
382,  69  S.  E.  657.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  § 
99;  Cent.  Dig.  §  236. 


§    74)  GUAHANTY   AND    SURETYSHIP  285 

ferred  by  the  National  Bank  Act,  this  rule  applies  to 
national  banks. **^  Thus  a  banking  corporation  has  no  implied 
power  to  become  an  accommodation  party  to  ner^jjable  pa- 
per,*" to  execute  a  bond  or  undertaking  for  another  in  a  judi- 
cial proceeding,*^  or  to  guarantee  that  a  draft  drawn  by  a  third 
person  on  a  customer  will  be  paid.^®  A  different  case  is  pre- 
sented where  a  bank  enters  into  guaranty  for  its  own  advan- 
tage as  an  incident  to  business  in  which  it  is  authorized  to  en- 
gage.*® Thus  a  bank  may  incur  the  ordinary  obligation  of  an 
indorser  incident  to  the  transfer  of  negotiable  paper,°°  and  it 
may  expressly  guarantee  such  paper  properly  issued  or  trans- 
ferred by  it.®^  So,  in  conveying  real  estate,  it  may  enter  into 
the  usual  covenants  of  warranty.®^  ' 

8  5  See  cases  cited  in  preceding  note. 

8  6  National  Bank  v.  Atkinson  (C.  C.)  55  Fed.  465;  Bacon  v.  Farm- 
ers' Bank,  79  Mo.  App.  406;  Central  Bank  v.  Empire  Stone  Dressing 
Co.,  26  Barb.  (N.  Y.)  23;  Morford  v.  Farmers'  Bank  of  Saratoga 
County,  26  Barb.  (N.  T.)  568.  See  "Banks  and  Banking,"  Dec.  Difj. 
(Key  No.)  §  99;  Cent.  Dig.  §  236. 

8  7  Bailey  v.  Farmers'  Nat.  Bank.  97  111.  App.  66;  Sturdevant  Bros. 
&  Co.  V.  Farmers'  &  Merchants'  Bank  of  Rushville,  62  Neb.  472,  87 
N.  W.  156;  Id.,  69  Neb.  220,  95  N.  W.  819.  See  "Banks  and  Bank- 
ing." Dec.  Dig.  (Key  No.)  §§  96,  99,  258;  Cent.  Dig.  §  236. 

88  National  Bank  of  Brunswick  v.  Sixth  Nat.  Bank,  212  Pa.  238, 
61  Atl.  889.  -See  ''Banks  and  Bunking;'  Dec.  Dig.  (Key  No.)  §§  99, 
260;  Cent.  Dig.  §§  236,  981,. 

8  9  Central  R.  &  Banking  Co.  of  Georgia  v.  Farmers'  Loan  &  Trust 
Co.,  114  Fed.  263,  52  C.  C.  A.  149 ;  Talman  v.  Rochester  City  Bank, 
18  Barb.  (N.  Y.)  123;  Dabney^  v.  Bank  of  State.  3  S.  C.  124.  Sec 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  99;    Cent.  Dig.  §  236. 

9  0  United  States  Nat.  Bank  v.  First  Nat.  Bank,  79  Fed.  290,  24 
C.  C.  A.  597.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  99. 
109,  260;  Cent.  Dig.  §§  236,  98J,. 

91  People's  Bank  v.  Manufacturers'  Nat.  Bank,  101  U.  S.  181,  25  L. 
Ed.  907 ;  Cochran  v.  United  States,  157  U.  S.  286,  15  Sup.  Ct.  628.  39 
L.  Ed.  704 ;  Thomas  v.  City  Nat.  Bank  of  Hastings,  40  Neb.  501,  58 
N.  W.  943,  24  L.  R.  A.  263.  See,  also,  Appleton  v.  Citizens'  Cent. 
Nat.  Bank  of  New  York,  190  N.  Y.  417,  S3  N.  E.  470,  32  L.  R.  A.  (N. 
S.)  543.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  .99;  Cent. 
Dig.  §  236. 

"2  See  Merchants'  Bank  of  Yaldosta  v.  Bni''(i.  160  Fed.  642.  90  C. 


286  BANKING  CORPORATIONS  (Ch.  9 

It  is  very  generally  held,  and,  this  being  the  doctrine  of  the 
Supreme  Court  of  the  United  States,  the  rule  applies  to  na- 
tional banks,  that  an  ultra  vires  contract  of  guaranty  is  void, 
and  that  the  bank  in  an  action  thereon  may  plead  this  fact 
in  defense,  although  the  other  party  has  acted  upon  the  faith 
of  the  guaranty."^  If,  however,  the  bank  has  received  money 
or  property  under  the  contract,  it  is  held,  even  where  the 
stricter  rule  prevails,  that  the  bank  may  be  compelled  to  re- 
fund what  it  has  received,  not  in  an  action  upon  the  unlawful 
contract,  but  in  an  action  quasi  ex  contractu.^*  And  if  the 
contract  is  such  that  it  might  under  certain  circumstances  prop- 
erly be  entered  into,  in  the  absence  of  evidence  to  the  contrary, 
the  presumption  will  prevail  that  it  was  lawfully  entered  into.®' 
A  holder  can,  of  course,  charge  a  bank  as  an  accommodation 
party  to  a  negotiable  instrument,  if  he  is  a  holder  in  due  course 
and  without  notice  of  the  accommodation  character  of  the 
bank's  signature.*® 

C.  A.  338,  17  L.  R.  A.  (N.  S.)  526.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §§  96,  99;  Cent.  Dig.  §§  230-236. 

0  3  Bowen  v.  Needles  Nat.  Bank,  94  Fed.  925,  36  C.  C.  A.  553;  Mer- 
chants' Bank  of  Valdosta  v.  Baird,  160  Fed.  642,  90  C.  C.  A.  338,  17 
L,  R.  A.  (N.  S.)  526;  First  Nat.  Bank  v.  American  Nat.  Bank,  173 
Mo.  153,  72  S.  W.  1059.  Contra:  Seeber  v.  Commercial  Nat.  Bank 
(C.  C.)  77  Fed.  957 ;  Hutching  v.  Planters'  Nat.  Bank,  128  N.  C.  72,  38 
S.  E.  252.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  101. 
260,  261;   Cent.  Dig.  §§  237,  238,  991-1000. 

94  Citizens'  Cent.  Nat.  Bank  of  New  York  v.  Appleton,  216  U.  S. 
196,  30  Sup.  Ct.  364,  54  L.  Ed.  443 ;  Appleton  v.  Citizens'  Cent.  Nat. 
Bank  of  New  York,  190  N.  Y.  417,  83  N.  E.  470,  32  L.  R.  A.  (N.  S.) 
543;  Norton  v.  Derry  Nat.  Bank,  61  N.  H.  589.  60  Am.  Rep.  334. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  101;  Cent.  Dig.  If 
237,  238. 

9  5  Mine  &  Smelter  Supply  Co.  v.  Stockgrowers'  Bank,  173  Fed. 
859,  98  C.  C.  A.  229.  Cf.  Sturdevaut  Bros.  &  Co.  v.  Farmers'  &  Mer- 
chants' Bank  of  Rushville,  02  Neb.  472,  87  N.  W.  156;  Id.,  69  Neb. 
220,  95  N.  W.  819.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
99;   Cent.  Dig.  §  236. 

0  8  In  re  Troy  &  Cohoes  Shirt  Co.  (D.  C.)  130  Fed.  420.  See,  also, 
Bowen  v.  Needles  Nat.  Bank,  94  Fed.  925.  36  C.  C.  A.  553;    '"lark. 


§   T4)  GUARANTT   AND   SUItETYSHIP  287 

OtJier  Contracts 

In  general,  it  may  be  said  that  a  banking  corporation  has 
power  to  enter  into  any  contract  for  its  own  advaiita^e  which 
is  incidental  to  the  business  in  which  it  is  authorized  to  en- 
gage." Thus,  a  national  bank,  having  power  to  receive  de- 
posits, may  give  a  bond  to  secure  then?."**  It  is  not  always 
easy  to  draw  the  line  between  what  is  and  what  is. not  witliin 
the  implied  powers.  It  has  been  held  that  a  national  bank 
may  engage  in  the  business  of  dealing  in  and  exchanging 
national  bonds,®^  but  that  it  may  not  deal  as  a  broker  in  buy- 
ing and  selling  securities.^""  It  has  been  held,  however,  that 
the  lending  of  money  on  deposit  for  a  customer,  unless  pro- 

Corp.  (2d  Ed.)  174.    &'ee  "Banks  and  Banking,"  Dec.  Dif/.  (Key  No.)  §§ 
99,  260;   Cent.  Dig.  §§  236,  98^. 

I  8  7  McCraith  v.  National  Mohawk  Val.  Bank,  104  N.  Y.  414,  10  N. 
E.  862.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  96;  Cent. 
Dig.  §  230. 

98  Interstate  Nat.  Bank  v.  Ferguson,  48  Kan.  732,  30  Pac.  237; 
State  v.  First  Nat.  Bank  (C.  C.)  88  Fed.  947.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §§  96,  99;  Cent.  Dig.  §§  230-236. 

t'8  Leach  v.  Hale,  31  Iowa,  69,  7  Am.  Rep.  112.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §§  25S,  260;  Cent.  Dig.  §§  977-990. 

100  Farmers'  &  Merchants'  Nat.  Bank  v.  Smith,  77  Fed.  129,  23  C. 
C.  A.  80 ;  Weckler  v.  First  Nat.  Bank  of  Hagerstown,  42  Md.  581,  20 
Am.  Rep.  95;  First  Nat.  Bank  of  Allentown  v.  Hock,  89  Ba.  324,  33 
Am.  Rep.  769.  See,  also,  Logan  County  Nat.  Bank  v.  Townsend.  139 
U.  S.  67,  11  Sup.  Ct.  496.  35  L.  Ed.  107. 

It  has  not  power  to  loan  the  money  of  other  persons.  Grow  v. 
Cockrill,  63  Ark.  418,  39  S.  W.  60,  30  L.  R.  A.  89. 

An  agreement  to  procure  a  person  applications  for  insurance  if 
he  would  procure  for  it  a  customer  is  ultra  vires.  Dresser  v.  Trad- 
ers' Nat.  Bank,  105  Mass.  120.  42  N.  E.  567. 

A  national  bank,  which  itself  purchased  notes  it  had  been  author- 
ized by  the  owner  to  sell  to  a  third  party,  and  which  thus  became  uii- 
der  general  principles  of  law  liable  for  their  value  as  for  a  conver- 
sion, is  not  protected  from  such  liability  by  the  National  Bank  Act, 
though  it  was  not  within  its  powers  to  act  as  agent  for  sale  of  the 
notes.  First  Nat.  Bank  v.  Anderson.  172  U.  S.  573,  19  Sup.  Ct.  284, 
43  L.  Ed.  feoS.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  2-58, 
260;  Cent.  Dig.  §§  277-290. 


288  BANKING  CORPORATIONS  (Ch.  9 

hibited,   is   within  the  powers   of  a  state  bank.^"^     A  bank,^ 
state  ^*'-  or  national/"^  has  no  power  to  enter  into  a  partner- 
ship.    And  ordinarily  an  incorporated  bank  is  without  power 
to  devote  money  gratuitously  to  manufacturing  corporations, 
exhibitions,  and  the  like.^°* 

101  Bobb  V.  Savings  Bank  (Ky.)  64  S.  W.  494.  See,  also,  New  Hope 
&  D.  Bridge  Co.  v.  Plienix  Bank,  3  N.  Y.  156. 

The  bank  must  use  ordinary  care.  Watson  v.  Roth,  191  111.  3S2, 
61  N.  E.  65 ;  Wykoff  v.  Irvine,  6  Minn.  49G  (Gil.  344),  80  Am.  Dec. 
461 ;  Larson  v.  Utah  Loan  &  Trust  Co..  23  Utah,  449,  65  Pac.  208. 
Even  if  it  acts  gratuitously.  Watson  v.  Fagner,  208  111.  136,  70  N.  E. 
23;  Clinton  Nat.  Bank  v.  National  Park  Bank  of  New  York,  37 
App.  Div.  601,  56  N.  Y.  Supp.  244.  See  ''Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §§  96,  195;  Cent.  Dig.  §  728. 

102  Interstate  Trust  &  Banking  Co.  v.  Reynolds.  127  La.  193,  53 
South.  520.  See  ''Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  101, 
261;  Cent.  Dig.  §§  237,  238,  991-1000. 

10  3  A  national  bank  may  not  become  the  absolute  owner,  in  satis- 
faction of  a  debt,  of  shares  represented  by  transferable  certificates 
in  a  partnership  formed  to  purchase,  improve,  and  sell  a  leasehold, 
and  such  want  of  authority  is  a  defense  to  an  action  against  it  upon 
liability  for  the  partnership  debts.  Merchants'  Nat.  Bank  v.  Wehr- 
maun,  202  U.  S.  205,  26  Sup.  Ct.  613,  50  L.  Ed.  1036. 

A  national  bank,  having  joined  in  a  partnership,  cannot  be  pre- 
vented from  recovering  moneys  loaned  to  the  firm  on  the  ground 
that  it  had  no  power  to  become  a  partner.  Cameron  v.  First  Nat. 
Bank  of  Decatur  (Tex.  Civ.  App.)  34  S.  W.  178.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §§  101,  261;  Cent.  Dig.  §§  237,  238,  992. 

104  McCoy  V.  World's  Columbian  Exhibition,  186  lU.  356,  57  k.  E. 
1043,  78  Am.  St.  Rep.  2.88;  McCrory  v.  Chambers,  48  111.  App.  445; 
Robertson  v.  Buffalo  County  Nat.  Bank,  40  Neb.  235.  58  N.  W.  715 ; 
Arkansas  Valley  &  W.  Ry.  Co.  v.  Farmers'  &  Merchants'  Bank,  21 
Okl.  322,  96  Pac.  765,  129  Am.  St.  Rep.  7S2  (subscription  to  secure 
construction  of  railroad).  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  96-98;  Cent.  Dig.  §§  230-235. 


g   75)  ULTRA    VIKKS    ACTS    AND   CONTRACTS  289 

ULTRA  VIRES  ACTS  AND  CONTRACTS 

75.  An  act  is  said  to  be  ultra  vires  when  it  is  beyond  the 
powers  expressly  or  impliedly  conferred  upon  a 
corporation.  When  a  corporation  performs  an  ul- 
tra vires  act,  the  state  may  maintain  proceedings 
against  it  to  forfeit  its  charter  for  misuser,  and  this 
is  usually  the  only  penalty  when  a  banking  corpo- 
ration takes  an  unauthorized  conveyance,  the  con- 
veyance vesting  title  in  the  bank.  On  the  question 
whether,  and  under  what  circumstances,  an  action 
will  lie  on  an  ultra  vires  contract,  the  authorities 
are  in  conflict,  and  there  is  much  confusion  in  the 
cases.  Some  courts  hold  that  an  unauthorized  con- 
tract is  void,  as  being  beyond  the  powers  confer- 
red, and  that,  as  a  rule,  no  action  can  be  maintained 
upon  it;  while  other  courts  hold  that  the  plea  of 
ultra  vires  should  not  prevail,  whether  interposed 
for  or  against  the  corporation,  when  it  would  be 
inequitable  and  unjust  to  allow  it,  as  where  the 
party  seeking  to  enforce  the  contract  has  performed 
it  on  his  or  its  part,  and  the  other  has  received  the 
benefit  of  performance.    All  courts  agree  that 

(1)  If  the  contract  has  been  fully  executed  on 
both  sides,  the  courts  will  not  interfere  at  the  in- 
stance of  either  party  to  undo  what  has  been  done. 

(2)  If  the  contract  is  executory  on  both  sides, 
neither  party  can  maintain  an  action  upon  it. 

(3)  When  the  contract  is  one  within  the  general 
power  of  the  corporation,  but  is  unauthorized  only 
under  the  particular  circumstances  of  which  the 
party  seeking  to  enforce  it  had  not  notice,  an  ac- 
tion thereon  can  be  maintained  by  such  party 
against  the  corporation. 

(4)  When  either  party  has  received  benefits  un- 

TlFF.T'.KS.^  ]!.— 1!) 


290  BANKING   CORPORATIONS  (Ch.  9 

der  the  contract,  such  party  may  be  compelled  to 
refund  what  he  or  it  has  received. 

(5)  Where  a  charter  prohibits  a  contract  or 
transaction,  but  does  not  declare  it  void,  and  the 
purpose  of  the  charter  does  not  indicate  an  inten- 
tion to  make  it  void,  it  is  generally  held  that  the 
objection  that  it  was  prohibited  can  be  raised  only 
by  the  state  in  a  direct  proceeding  against  the  cor- 
poration to  forfeit  its  charter. 

Ultra  Vires 

An  act  is  said  to  be  ultra  vires  when  it  is  beyond  the  corpo- 
rate powers,  meaning  by  "power"'  authority  or  right  to  act. 
When  a  corporation  has  thus  exceeded  its  powers,  the  state 
may  maintain  proceedings  against  it  to  forfeit  its  charter  for 
misuser;  and  when  an  ultra  vires  act  is  threatened,  a  stock- 
holder may  maintain  a  bill  in  equity  to  enjoin  its  performance, 
and  a  stockholder  may  enjoin  the  performance  of  an  ultra 
vires  contract. ^°^  But  it  does  not  follow  that  the  act  of  a  cor- 
poration is  of  no  effect  because  it  is  ultra  vires.  For  example, 
an  ultra  vires  purchase  of  real  estate  by  a  banking  corporation 
is  not  void,  but  vests  title  in  it.^°'' 

Upon  the  question  whether,  and  under  what  circumstances, 
an  action  will  lie  on  an  ultra  vires  contract,  the  authorities 
are  in  conflict.^"^  If  an  ultra  vires  contract  has  been  fully 
executed  on  both  sides,  the  rule  prevails  everywhere  that  nei- 
ther party  can  maintain  an  action  at  law  or  a  suit  in  equity  to 
recover  what  he  or  it  has  parted  with.^°®  And  if  an  ultra 
vires  contract  is  wholly  executory  on  both  sides,  all  courts 
substantially  agree  that  no  action  can  be  maintained  to  enforce 
it,  either  to  recover  damages  for  its  breach,  or  for  specific  per- 

105  Clark,  Corp.  (2d  Ed.)  pp.  161-1G4. 

106  Ante,  p.  2S2. 

lOT  Clark,  Corp.  (2d  Ed.)  167. 
108  Clark,  Corp.  (2d  Ed.)  171. 


§    75)  ULTRA    VIRES   ACTS   AND   CONTRACTS  291 

formance.^""  Many  courts  hold,  however,  that  if  a  contract 
is  objectionable  only  because  it  is  ultra  vires,  in  an  action  upon 
it  the  plea  of  ultra  vires  will  not  prevail,  vvhetherwiaterposed 
for  or  against  the  corporation,  when  it  would  be  inequitable 
and  unjust  to  allow  it,  as  where  the  party  seeking  to  enforce 
performance  has  performed  on  his  part  and  the  other  has  re- 
ceived the  benefit  of  such  performance.  This  is  clearly  the 
better  doctrine,  and  is  supported  by  the  great  weight  of  au- 
thority.^^** Some  courts,  on  the  other  hand,  including  the  Su- 
preme Court  of  the  United  States,  hold  that  an  ultra  vires 
contract  is  void,  as  being  beyond  the  powers  conferred  upon 
the  corporation,  and  that,  as  a  rule,  no  action  can  be  main- 
tained upon  it.^^^  "A  contract  by  a  corporation  which  is  ultra 
vires  in  the  proper  setise,"  said  Mr.  Justice  Gray,  speaking  for 

109  Holt -V.  Winfield  Bank  (C.  C.)  25  Fed.  812;  McNulta  v.  Corn 
Belt  Bank,  164  111.  427,  45  N.  E.  Q54,  56  Am.  St.  Rep.  203;  Bank  of 
Michigan,  President,  etc.,  of,  v.  Niles,  Walk.  Ch.  (Mich.)  99;  Id.,  1 
Doug.  (Mich.)  401,  41  Am.  Dec.  575;  Nassau  Bank  v.  Jones,  95  N.  Y. 
115,  47  Am.  Rep.  14 ;  Jemison  v.  Citizens'  Sav.  Bank  of  Jefferson, 
122  N.  Y.  135,  25  N.  E.  264,  9  L.  R.  A.  70S,  19  Am.  St.  Rep.  482.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  101;  Cent.  Dig.  §§  228, 
237,  238. 

110  Hunt  V.  Hauser  Malting  Co.,  90  Minn.  282,  96  N.  W.  85 ;  Id., 
95  Minn.  206,  103  N.  W.  1032 ;  'Tootle  v.  First  Nat.  Bank,  6  Wash. 
181,  33  Pac.  345;  Security  Nat.  Bank  v.  St.  Croix  Power  Co.,  117 
Wis.  211,  94  N.  W.  74.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  101,  261;  Cent.  Dig.  §§  237,  238,  991-1000. 

See,  also,  although  opposed  to  the  doctrine  of  the  federal  courts, 
American  Nat.  Bank  v.  National  Wall  Paper  Co.,  77  Fed.  85,  23 
C.  C.  A.  33;  Seeber  v.  Conmiercial  Nat.  Bank  (C.  C.)  77  Fed.  957. 
See,  generally,  Clark^  Corp.  (2d  Ed.)  178  et  seq.  See  "Banks  and 
Banking;'  Dec.  Dig.  (Key  No.)  §  101;  Cent.  Dig.  §§  228,  237,  238; 
"Specific  Performance,"  Dec.  Dig.  {Key  No.)  §  26;   Cent.  Dig.  §  107. 

111  California  Nat.  Bank  v.  Kennedy,  167  U.  S.  362,  17  Sup.  Ct. 
831,  42  L.  Ed.  198 ;  McCormick  v.  Market  Nat.  Bank,  165  U.  S.  538,  17 
Sup.  Ct.  433,  41  L.  Ed.  817;  First  Nat.  Bank  v.  Hawkins,  174  U.  S. 
364,  19  Sup.  Ct.  739,  43  L.  Ed.  1007;  De  La  Vergne  Refrigerating 
Mach.  Co.  V.  German  Sav.  Inst.,  175  U.  S.  40,  20  Sup.  Ct.  20,  44  L.  Ed. 
65;  Metropolitan  Stock  Exchange  v.  Lyndonville  Nat.  Bank,  76  Vt. 


292  BANKING   CORPORATIONS  (Ch.  9 

the  Supreme  Court  of  the  United  States/^*  "that  is  to  say, 
outside  the  object  of  the  creation  as  defined  in  the  law  of  its 
organization,  and  therefore  beyond  the  powers  conferred  up- 
on it  by  the  legislature,  is  not  voidable  only,  but  wholly  void, 
and  of  no  legal  efTect.  The  objection  to  the  contract  is,  not 
merely  that  the  corporation  ought  not  to  have  made  it,  but 
that  it  could  not  make  it.  The  contract  cannot  be  ratified  by 
either  party,  because  it  could  not  have  been  authorized  by 
either.  No  performance  on  either  side  can  give  the  unlawful 
contract  any  validity,  or  be  the  foundation  of  any  right  of  ac- 
tion upon  it.  When  a  corporation  is  acting  within  the  gen- 
eral scope  of  the  powers  conferred  upon  it  by  the  legislature, 
the  corporation,  as  well  as  persons  contracting  with  it,  may  be 
estopped  to  deny  that  it  has  complied  with  the  legal  formali- 
ties, which  are  prerequisites  to  its  existence  or  to  its  action, 
because  such  requisites  might  in  fact  have  been  complied  with. 
But  when  the  contract  is  beyond  the  powers  conferred  upon  it 
by  existing  laws,  neither  the  corporation  nor  the  other  party 
to  the  contract  can  be  estopped,  by  assenting  to  it,  or  by  acting 
upon  it,  to  show  that  it  was  prohibited  by  those  laws." 

Even  in  those  jurisdictions  where  the  courts  hold  ultra  vires 
contracts  void,  an  exception  to  the  rule  is  made  where  the 
party  dealing  with  the  corporation  did  not  know,  and  is  not 
chargeable  with  knowledge,  of  the  ultra  vires  nature  of  the  con- 
tract. Every  person  dealing  with  a  corporation  is  charged  with 
notice  of  the  limitations  of  its  powers ;  but  if  the  contract  was 
one  which  was  within  the  general  powers  of  the  corporation, 
although  unauthorized  under  the  facts  and  circumstances  or 
for  the  particular  purpose,  of  which  the  other  party  had  not 
notice,   an  action  may  be  maintained  by  him   upon  the  con- 

.303,  57  Atl.  101.  See,  generally,  Clark,  Corp.  (2cl  Ed.)  168.  See 
'•Banks  and  Bankin;/;'  Dec.  Dig.  (Key  Xo.)  §§  101,  261;  Cent.  Dig. 
§§  237,  23S,  991-1000. 

112  Central  Transp.  Co.  v.  Pullman  Palace  Car  Co.,  139  IJ.  S.  24,  11 
Sup.   Ct.  478.  35  L.  Ed.  55.     -See  "Banks  and  Banking,"  Dec.  Dig. 


§    75)  ULTKA    VIRES   ACTS    AND   CONTRACTS  293 

tract.^^^  Thus  a  banking  corporation  having  general  power 
to  make  and  indorse  negotiable  paper  is  liable  thereon  to  a 
holder  in  due  course,  although  it  was  made  or  indSfsed  for  an 
unauthorized  purpose,  as  for  accommodation,  or  in  payment 
of  property  which  it  had  not  authority  to  purchase.^ ^* 

Again,  even  in  those  jurisdictions  where  the  courts  hold 
ultra  vires  contracts  void,  if  either  party  has  received  benefits 
under  such  a  contract,  such  party  may  be  compelled  to  refund 
or  to  give  compensation  therefor,  not  in  an  action  upon  the 
contract,  but  in  an  action  quasi  ex  contractu.^ ^°  "The  courts, 
while  refusing  to  maintain  any  action  upon  the  unlawful  con- 
tract, have  always  striven  to  do  justice  between  the  parties,  so 
far  as  could  be  done  consistently  with  adherence  to  law,  by 
permitting  property  or  money,  parted  with  on  the  faith  of  the 
unlawful  contract,  to  be  recovered  back,  or  compensation  to 
be  made  for  it.  In  such  case,  however,  the  action  is  not  main- 
tained upon  the  unlawful  c5ntract,  nor  according  to  its  terms; 
but  on  an  implied  contract  of  the  defendant  to  return,  or,  fail- 
ing to  do  that,  to  make  compensation  for,  property  or  money 

{Key  Xo.)  §§  101,  261;  Cent.  Dig.  §§  257,  2S8;  "Corporations,''  Dec. 
Dig.  {Key  Xo.)  §  38&;  Cent.  Dig.  §§  1556-1567. 

113  Monument  Nat.  Bank  v.  Globe  Works,  101  Mass.  57,  3  Am.  Rep. 
322 ;  Clark,  Corp.  (2d  Ed.)  173.  See  ''Banks  and  Banking,"  Dec.  Dig. 
{Key  2<o.)  §§  XOl,  261;  Cent.  Dig.  §§  '237,  238,  991-1000. 

114  Sioux  Falls  Nat.  Bank  v.  First  Nat'  Bank  of  Sioux  Falls,  6 
Dak.  113,  50  N.  W.  829;  Jacobs'  Pharmacy  Co.  v.  Southern  Bank- 
ing &  Trust  Co.,  97  Ga.  573,  25  S.  E.  171 ;  National  Bank  of  Repub- 
lic V.  Young,  41  N.  J.  Eq.  531,  7  Atl.  4SS ;  National  Park  Bank  v. 
German-American  Mutual  Warehouse  &  Security  Co.,  116  N.  Y.  281, 
22  N.  E.  567,  5  L.  R.  A.  673 ;  Marshall  Nat.  Bank  v.  O'Neal,  11  Tex. 
Civ.  App.  640,  34  S.  W.  344.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §§  101,  261;  Cent.  Dig.  §§  257,  238,  991-1000. 

115  Logan  County  Nat.  Bank  v.  Townseud,  130  U.  S.  67,  11  Sup.  Ct. 
490,  35  L.  Ed.  107;  Emmerling  v.  First  Nat.  Bank,  97  Fed.  739,  38 
C.  C.  A.  399;  L'Herbette  v.  Pittsfield  Nat.  Bank,  162  Mass.  137,  38 
N.  E.  368,  44  Am.  St.  Rep.  354.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  yo.)  §§  101,  261;  Cent.  Dig.  §§  237,  238,  991-1000. 


294  BANKING  CORPORATIONS  (Ch.  0 

which  it  has  no  right  to  retain.     To  maintain  such  an  action 
is  not  to  afifirm,  but  to  disaffirm,  the  unlawful  contract."  ^^® 

Effect  of  Prohibition  in  Charter 

If  the  charter  of  a  bank,  instead  of  merely  not  authorizing 
a  certain  contract,  expressly  prohibits  it,  the  contract  may 
stand  upon  a  different  footing  from  one  that  is  merely  ultra 
vires.  Often  such  contracts  are  held  to  be  illegal  and  void, 
so  that  no  action  can  be  maintained  upon  them.  Thus  where  a 
bank  had  taken  a  deposit  upon  time,  in  violation  of  a  statute 
prohibiting  contracts  by  banks  for  the  payment  of  money  at 
a  future  day  certain,  it  was  held  that  the  agreement  because 
expressly  prohibited  was  illegal  and  void,  and  that  no  action 
could  be  maintained  against  the  bank  upon  the  contract.^ ^' 
Yet  if  the  charter  or  statute,  while  prohibiting  certain  con- 
tracts, does  not  declare  them  void,  and  the  purpose  of  the 
statute  does  not  show  an  intention  on  the  part  of  the  legis- 
lature to  make  them  void,  it  is  generally  held  that  an  objection 
that  they  were  prohibited  can  be  raised  only  by  the  state  in  a 
direct  proceeding  against  the  bank  to  forfeit  its  charter. ^^^ 
And  even  when  the  contract  is  held  to  be  illegal,  because  pro- 
hibited, if  the  prohibition  was  intended  for  the  protection  of 
the  party  asking  the  relief,  he  will  not  be  regarded  as  in  pari 
delicto,  and  he  may- disaffirm  the  contract  and  recover  what  he 
has  parted  with.    This  has  frequently  been  held  in  cases  where 

116  Pullman  Palace  Car  Co.  v.  Central  Transp.  Co.,  171  U.  S.  13S, 
IS  Sup.  Ct.  808,  43  L.  Ed.  108.  See  "Banks  and  Banking:'  Dec.  Dig. 
{Key  No.)  §§  101,  261;  Cent.  Dig.  §§  237,  238,  991-1000;  "Corpora- 
tions," Dec.  Dig.  {Key  No.)  §  385;  Cent.  Dig.  §§  1545-15^7. 

117  White  V.  President,  etc.,  of  Franklin  Bank,  22  Pick.  (Mass.) 
181.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  JVo.)  §§  101,  261; 
Cent.  Dig.  §§  237,  238,  991-1000;  "Corporations,"  Dec.  Dig.  {Key  Ko.) 
§  487;  Cent.  Dig.  §§  1S93-1S9S. 

lis  Union  National  Bank  v.  Matthews,  98  U.  S.  G21,  25  L.  Ed.  188: 
National  Bank  of  Genesee  v.  Whitney,  103  U.  S.  09,  20  L.  Ed.  443. 
See  "Banks  aM  Banking."  Dec.  Dig.  (Key  No.)  §§  101,  261;  Cent.  Dig. 
§S  237,  238,  991-1000;  "Corporations,"  Dec.  Dig.  {Key  No.)  §  387; 
Cent.  Dig.  §§  1548-1553. 


§    75)  ULTKA    VIUKS    ACTS   AND   CONTKACTS  295 

banks  have  been  prohibited  from  issuing  notes,  bills,  or  other 
securities,  the  parties  who  receive  the  prohibited  securities  be- 
ing permitted  to  recover  the  money  paid  for  themJiii- 

A  full  discussion  of  the  doctrine  of  ultra  vires  is  beyond 
the  scope  of  this  book.  In  the  cases  involving  ultra  vires  acts 
and  contracts  by  incorporated  banks,  both  views  have  neces- 
sarily prevailed,  according  to  the  doctrines  prevailing  in  the 
different  jurisdictions,  and  illustrations  of  this  divergence  of 
opinion  will  frequently  appear. 

National  Banks 

It  is  important  to  bear  in  mind  that  the  strict  view  of  the 
doctrine  of  ultra  vires,  which  is  asserted  by  the  Supreme 
Court  of  the  United  States,  governs  the  contracts  of  national 
banks.  At  the  same  time,  while  that  rule  has  sometimes  been 
applied  in  cases  arising  under  the  National  Bank  Act,^^°  it 
cannot  be  said  to  have  been  consistently  applied,  and  the  ten- 
dency of  the  court  has  been  to  hold  that  contracts  and  trans- 
actions unauthorized  by  the  act,  and  even  prohibited,  are  not 
void,  but  that,  where  no  other  penalty  is  imposed,  the  legis- 
lative intention  contemplated  as  the  only  penalty  for  a  viola- 
tion of  the  act  a  direct  proceeding  by  the  government  for  the 
forfeiture  of  the  bank's  charter.^ ^^     Such  has  been  the  con- 


ns See  White  v.  President,  etc.,  of  Franlvlin  Banlt.  22  Pick.  (Mass.) 
181 ;  Oneida  Bank  v.  Ontario  Banlj,  21  N.  Y.  490.  See  ''Banks  end 
Banking,"  Dec.  Dig.  {Key  No.)  §  101;  Cent.  Dig.  §§  237,  2d8j  "Cor- 
porations," Dec.  Dig.  (Key  No.)  §  J/Sl ;  Cent.  Dig.  §§  1893-1898. 

120  California  Nat.  Banlc  v.  Kennedy,  1G7  U.  S.  362,  17  Sup.  Ct. 
tSol,  42  L.  Ed.  li)S ;  ante,  p.  2S5.  See  ''Banks  and  Banking"  Dec. 
Dig.  (Key  No.)  §  261;  Cent.  Dig.  §§  991-1000. 

121  "It  has  been  held  repeatedly  by  this  court  that  where  the 
provisions  of  the  National  Banking  Act  prohibit  certain  acts  by 
banks  or  their  officers,  without  imposing  any  penalty  or  forfeiture 
applicable  to  particular  transactions  which  have  been  executed,  their 
validity  can  be  questioned  only  by  the  United  States,  and  not  by 
private  parties."  Thompson  v.  Saint  Nicholas  Nat.  Bank,  14G  U.  S. 
240,  13  Sup.  Ct.  66,  36  L.  Ed.  9-56.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  261;  Cent.  Dig.  §§  991-1000. 


296  BANKING  CORPORATIONS  (Ch.  9 

strnction  placed  upon  the  provisions  of  the  act  limiting  the 
liability  of  any  person  to  the  bank  for  money  borrowed/^^ 
limiting  the  bank's  own  indebtedness,^'^  prohibiting  the  bank 
from  making  any  loan  or  discount  on  the  security  of  or  being 
a  purchaser  or  holder  of  its  own  stock/-*  prohibiting  the 
bank  from  taking  real  estate  mortgages,  except  by  way  of  se- 
curity for  debts  previously  contracted,  and  from  purchasing, 
holding,  and  conveying  real  estate  except  for  certain  pur- 
poses.^^^ 

LIABILITY  OF  OFFICERS  TO  BANK 

76.  AT  COMMON  LAW — The  directors  and  other  officers 

of  a  banking  corporation  are  liable  to  it,  at  common 
law,  for  losses  sustained : 

(1)  By  reason  of  a  willful  abuse  of  the  confi- 
dence reposed  in  them,  as  by  exceeding  their  au- 
thority or  the  powers  of  the  corporation,  or  by  mis- 
application of  the  corporate  funds. 

(2)  By  reason  of  negligence  and  inattention  to 
their  duties.  Directors  are  bound  to  exercise  the 
same  diligence  and  care  which  ordinarily  prudent 
and  diligent  men  would  exercise  under  similar  cir- 
cumstances. 

77.  REMEDIES   AGAINST   OFFICERS— Where   a  loss 

results  to  the  corporation  by  the  fraud,  wrong, 
or  negligence  of  its  directors  or  other  officers, 
the  corporation  may  maintain  an  action  at  law 
to  recover  damages,  or,  in  a  proper  case,  a  suit 
in  equity  to  compel  them  to  account.  An  individ- 
ual stockholder  cannot  as  a  rule  maintain  an  ac- 
tion, but  he  may  sue  when  the  directors  will  not 

122  Ante,  p.  228.  124  Ante,  p.  249. 

128  Ante,  p.  283.  126  Ante,  p.  251. 


§§    76-78)  LIABIIJTY    OF    OFFICERS   TO    BANK  297 

institute  suit,  and  relief  cannot  be  obtained  by  ap- 
plying to  a  stockholders'  meeting.  Creditors  of  the 
corporation,  in  case  of  its  insolvency,  ni$y  enforce 
the  liability  to  the  corporation. 

78.  STATUTORY  LIABILITY— In  many  jurisdictions, 
by  statute,  the  directors  and  other  officers  who  are 
guilty  of  certain  acts  of  official  misconduct  are 
made  liable  to  creditors,  and  for  certain  acts  are 
liable  criminally. 

Officers  and  Agents 

As  with  other  corporations,  a  majority  of  the  stockholders 
of  a  banking  corporation  can  regulate  and  control  the  exercise 
of  its  powers,  and  has  power  by  a  vote  duly  taken  to  bind  the 
minority  within  the  powers  of  the  corporation.  The  acts  of 
a  majority,  to  be  binding  on'  the  corporation,  must  be  done- 
at  a  meeting  of  the  stockholders  duly  held  and  conducted,  at 
which  each  shareholder  has  a  vote,  usually  one  vote  for  each 
share.  Usually  the  power  to  make  by-laws  regulating  the 
conduct  and  defining  the  duties  of  the  members  and  officers 
is  expressly  conferred,  but  it  will  otherwise  be  implied;  the 
power  being  primarily  in  the  stockholders,  although  they  or 
the  charter  may  authorize  the  directors  to  make  them.  Gen- 
erally the  charter  provides  what  officers  and  agents  shall  man- 
age the  affairs  of  the  corporation.  Usually  the  management 
is  vested  in  a  board  of  directors  or  trustees,  who  are  elected 
periodically  by  the  stockholders,  and  the  directors  appoint 
other  officers  and  agents.  The  charter  may  or  may  not  pro- 
vide what  qualifications  are  necessary  for  directors  and  other 
officers.  \A^hen  the  general  management  is  intrusted  to  a 
board  of  directors  or  other  officers,  they  have  in  general,  when 
acting  as  a  board,  the  power  to  bind  the  corporation  by  any 
act  or  contract  within  the  powers  conferred  upon  it. 

These  are  all   matters  of  general  corporation  law,  except 
so  far  as  they  involve  the  terms  and  construction  of  particu- 


298  BANKING   CORPORATIONS  (Ch.  9 

lar  charters,  and  a  consideration  of  them,  except  so  far  as 
concerns  national  banks,  is  beyond  the  scope  of  this  book.^-^ 

Liability  of  Oificers  to  the  Bank 

In  general,  as  with  other  corporations,  the  directors  or 
other  officers  of  a  banking  corporation,  if  they  act  in  good 
faith,  within  the  limits  of  the  corporate  powers  and  within 
their  authority,  and  use  proper  prudence  and  diligence,  are 
not  responsible  for  losses  resulting  to  the  corporation  from 
mere  mistakes  or  errors  in  judgment,^-'  or  for  losses  from 
accident,  theft,  and  the  like,  where  they  have  not  been  neg- 
ligent.^=^« 

On  the  other  hand,  the  directors  or  other  officers  who  will- 
fully abuse  their  trust,  or  misapply  the  funds  of  the  corpo- 
ration, by  which  loss  is  sustained,  are  personally  liable  to 
make  good  the  loss.^-^    They  are  bound  to  observe  the  limits 

12  6  See  Clark,  Corp.  (2d  Ed.)  pp.  430-479. 

127  Wheeler  v.  Aiken  County  Loan  &  S.  Bank  (C.  C.)  75  Fed.  781; 
Witters  v.  Sowles  (C.  C.)  31  Fed.  1;  Jones  v.  Johnson.  S6  Ky.  530, 
6  S.  W.  582;  Cope  v.  Westbay,  188  Mo.  638,  87  S.  W.  504;  Second 
Nat.  Bank  of  Oswego  v.  Burt,  93  N.  Y.  233.  See  "Banks  and  Bank-  • 
ing,"  Dec.  Dig.  (Key  No.)  §  5^;  Cent.  Dig.  §§  92-101. 
■  128  Batchelor  v.  Planters'  Nat.  Bank  of  Louisville,  78  Ky.  435; 
Savings  Bank  of  Louisville's  Assignees  v.  Caperton,  87  Ky.  306,  8  S. 
W.  885,  12  Am.  St.  Rep.  488.  See  ''Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  54;  Cent.  Dig.  §§  92-lfn. 

129  Cooper  v.  Hill,  94  Fed.  582,  36  C.  C.  A.  402;  Oakland  Bank  of 
Savings  v.  Wilcox,  60  Cal.  126  (paying  overdraft  of  one  without 
means) ;  San  Joaquin  Val.  Bank  v.  Bours,  65  Cal.  247,  3  Pac.  864 ; 
First  Nat.  Bank  of  Ft.  Scott  v.  Drake,  29  Kan.  311,  44' Am.  Rep.  646; 
Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Mon.  (Ky.)  171 ;  First  Nat. 
Bank  of  Sturgis  v.  Reed,  36  Mich.  263;  Austin  v.  Daniels,  4  Denio 
(N.  Y.)  299,  47  Am.  Dec.  252 ;  Bank  of  St.  Mary's  v.  Calder,  3  Strob. 
(S.  C.)  403  (cashier  paying  overdraft  without  excuse) ;  Brown  v. 
Farmers'  &  Merchants'  Nat.  Bank,  88  Tex.  205,  31  S.  W.  285,  33  L.  R. 
A.  359  (loan  to  infant) ;  First  Nat.  Bank  of  Brandon  v.  Briggs'  Es- 
tate, 70  Vt.  599,  41  Atl.  586.  Cf.  Mcllroy  Banking  Co.  v.  Dickson,  66 
Ark.  327,  50  S.  W.  868.  See,  also.  Farmers'  &  Traders'  Bank  v.  Kim- 
ball Milling  Co.,  1  S.  D.  388,  47  N.  W.  402,  36  Am.  St.  Rep.  739  (fol- 
lowing ti-ust  funds  fraudulently  diverted  by  officers). 

Where  directors  of  a  national  bank  engaged  in  or  linowingly  per- 


§§    76-78)  LIABILITY   OF    OFFICERS   TO    BANK  299 

placed  upon  their  powers  by  the  charter  and  the  by-laws,  and 
the  rules  of  the  bank,  and,  if  they  intentionally  or  negligently 
exceed  those  powers,  they  are  liable  for  the  loss.^^**  And  they 
are  equally  liable  if  they  suffer  the  corporate  funds  to  be 
wasted  by  negligence  or  inattention  to  their  duties,  although 
they  do  not  act  in  bad  faith.  Thus  a  cashier  or  other  officer 
who  is  charged  with  the  duty  of  making  loans  and  discounts, 
and  the  like,  is  liable  for  losses  which  result  from  his  failure 
to  exercise  the  care  and  discretion  which  an  ordinarily  pru- 
dent man  would  exercise  in  his  own  affairs. ^^^ 


mitted  stock  speculation  by  the  president  and  vice  president  witti  the 
bank's  funds,  such  directors  were  liable  for  the  losses  sustained. 
McKinnou  v.  Morse  (C.  C.)  177  Fed.  576.  Sec  "Banks  and  Banking" 
Dec.  Dig.  {Key  No.)  §  5^;  Cent.  Dig.  §§  92-107. 

130  Western  Bank  of  Louisville,  Ky.,  v.  Coldemey's  Ex'x,  120  Ky. 
77C>.  83  S.  W.  629 ;  Cooper  v.  Hill.  94  Fed.  5S2.  36  C.  C.  A.  402. 

Where  a  national  bank  acquired  certain  mill  property  in  satisfac- 
tion of  a  debt,  and  the  directors  organized  a  corporation  among 
themselves  for  the  purpose  of  operating  the  mills  as  the  bank's 
agent,  using  its  funds,  and  operated  them  for  the  bank  at  a  loss  of 
.$23,000,  the  directors  of  the  bank  participating  are  liable  to  the 
creditors  for  the  loss.  Cockrill  v.  Abeles,  86  Fed.  505,  30  C.  C.  A. 
223. 

A  cashier,  required  by  the  by-laws  to  consult  other  officers,  or 
committees,  in  making  discounts,  is  not  responsible  by  reason  of 
failure  so  to  do,  where  the  committees  hold  no  meetings  and  the 
ofiicers  systematically  absent  themselves.  Second  Nat.  Bank  of 
Oswego  V.  Burt,  93  N.  Y.  233.  See,  also,  Wynn  v.  Tallapoosa  County 
Bank,  158  Ala.  469,  53  South,  228.  See-  ''Banks  and  Banking;'  Dec. 
Dig.  (Key  No.)  §  5-i;   Cent.  Dig.  §§  92-107. 

i3ipiiryse  V.  Farmers'  Bank  of  Beattyville  (Ky.)  33  S,  W.  532; 
First  Nat.  Bank  v,  Reese  (Ky.)  76  S.  W.  384 ;  Commercial  Bank  of 
Bay  City  v.  Chatfield.  121  Mich.  641,  80  N.  W.  712;  Id.,  127  Mich. 
407,   86   N.    W.    1015. 

The  purchase  of  a  note  by  the  president  and  managing  officer 
of  a  bank,  for  which  he  paid  from  its  funds  over  $20,000,  with 
knowledge  that  it  was  burdened  with  a  guaranty  made  by  the 
payee,  which  might  defeat  its  collection,  is  such  negligence  as 
renders  him  liable  to  account  to  the  bank  or  its  creditors  for  any 


300  BANKING  CORPOKATIONS  (Ch.  9 

As  a  rule  one  officer  is  not  responsible  for  the  negligence  or 
defaults  of  another/^-  although  he  is,  of  course,  responsible 
if  he  assists  or  connives  therein;  ^^^  and  a  superior  officer  may 
be  liable  for  the  acts  of  a  subordinate,  if  he  fails  to  exercise 
reasonable  diligence  in  supervision. ^=^* 

Directors  stand  upon  a  somewhat  different  footing  from  the 
executive  officers  charged  with  the  duties  of  transacting  the 
business  of  the  bank  and  actively  managing  its  affairs.  It  is 
their  duty  to  use  proper  care  in  the  selection  of  the  executive 
officers,  and  to  exercise  a  general  supervision  over  the  bank's 
affairs.^^^  "They  are  not  insurers  of  the  fidelity  of  the  agents 
whom  they  have  appointed,  who  are  not  their  agents,  but  the 
agents  of  the  corporation  ;  and  they  cannot  be  held  responsible 
for  losses  resulting  from  the  wrongful  acts  or  omissions  of 
other  directors  or  agents,  unless  the  loss  is  a  consequence  of 
their  own  neglect  of  duty,  either  for  failure  to  supervise  the 
business  with  attention,  or  in  neglecting  to  use  proper  care  in 

loss  which  resulted.  Stearns  v.  Lawrence,  83  Fed.  738,  28  C.  C. 
A.  66;  Id.  (C.  C.)  79  Fed.  738.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  54;   Cmt.  Dig.  §§  92-107. 

132  Commercial  Bank  of  Bay  City  v.  Chatfield,  121  Mich.  641, 
80  N.  W.  712;  Davenport  v.  Prentice,  126  App.  Div.  451,  110  N. 
Y.  Supp.  1056. 

A  by-law  of  a  bank,  making  the  cashier  responsible  "for  all  the 
moneys,  funds,  and  valuable  of  the  bank,"  in  force  when  defendant 
was  elected  cashier,  became  a  part  of  his  contract  and  made  him 
liable  for  losses  resulting  from  mistakes  or  malfeasance  of  the 
assistant  cashier,  liable  under  another  by-law  for  money  coming 
into  his  possession.  Rio  State  Bank  v.  Amondson,  141  Wis.  82,  123 
N.  W.  634.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  5^; 
Cent.  Dig.  §§  92-107. 

i33Hobart  v.  Dovell,  38  N.  J.  Eq.  553;  Latimer  v.  Vcader,  20 
App.  Div.  418,  46  N.  T»  Supp.  823.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  5/,;   Cent.  Dig.  §§  92-107. 

134  See  Batchelor  v.  Planters'  Nat.  Bank  of  Louisville,  78  Kj-. 
435;  Grant  County  Deposit  Bank  v.  Points  (Ky.)  56  S.  W.  062.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  5^;  Cent.  Dig.  §§ 
92-107. 

135  Post,  p.  310. 


§§    76-7S)  LIABILITY    OF   OFFICERS    TO    BANK  301 

the  appointment  of  agents."  ^^^  "Rank  directors  are  often 
styled  'trustees' ;  but  they  are  not  in  any  technical  sense.  The 
relation  between  the  corporation  and  them  is  rathAC-  that  of 
principal  and  agent,  certainly  so  far  as  creditors  are  concerned, 
between  whom  and  the  corporation  the  relation  is  that  of  con- 
tract, and  not  of  trust."  "^  They  "are  not  to  be  judged  by 
the  same  strict  standard  as  the  agent  or  trustee  of  a  private  es- 
tate. Were  such  a  rule  applied,  no  gentleman  of  character 
and  responsibility  would  he  found  willing  to  occupy  such 
places."  ^'^ 

The  extent  of  the  supervision  and  the  degree  of  watchful- 
ness which  they  are  required  to  exercise  is  a  question  on  which 
the  courts  have  differed,  at  least  in  their  expressions.  Some 
courts  declare  that  the  directors  are  bound  to  manage  the  af- 
fairs of  the  corporation  with  the  same  degree  of  care  and 
prudence  which  is  generally  exercised  by  business  men  in  their 
own  affairs. ^^''  Most  courts  declare,  however,  that  the  degree 
of  care  required 'is  only  such  as  an  ordinarily  prudent  and 
diligent  man  would  exercise  under  similar  circumstances.^*" 

13G  Briggs  V.  SpaulcUng,  141  U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed. 
662.  See,  also,  Warner  v.  Penoyer,  91  Fed.  587,  33  C.  C.  A.  222. 
44  L.  R.  A.  761 ;  Clews  v.  Bardon  (C.  C.)  36  Fed.  617 ;  Lowndes  v. 
City  Nat.  Bank  of  South  Norwalk,  S2  Conn.  8,  72  Atl.  150,  22  L.  R. 
A.  (N.  S.)  408;  Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932,  4 
L.  R.  A.  (N.  S.)  597.  See  "Banks  ancH  Banking,"  Dec.  Dig.  (Key 
No.)  §  5//;   Gent.  Dig.  §§  92-107. 

137  Briggs  V.  Spaulding,  141  U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed. 
662.  Cf.  Holmes  v.  McDonald,  226  111.  169,  80  N.  E.  714.  See  "Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §  5//;   Cent.  Dig.  §§  92-107. 

138  Spering's  Appeal,  71  Pa.  11,  10  Am.  Rep.  684.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  54;   Cent.  Dig.  §§  92-107. 

■139  See  Hun  v.  Cary,  82  N.  Y.  65,  37  Am.  Rep.  546;  Warren  v. 
Robison,  19  Utah,  289,  57  Pac.  287,  75  Am.  St.  Rep.  734;  Mar- 
shall V.  Farmers'  &  Mechanics'  Sav.  Bank  of  Alexander,  85  Va. 
676,  8  S.  E.  586,  2  L.  R.  A.  534,  17  Am.  St.  Rep.  84;  Elliott  v. 
Farmers'  Bank,  61  W.  Va.  641,  57  S.  E.  242.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  54;    Cent.  Dig.  §§  92-107. 

140  Briggs  V.  Spaulding,  141  U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed. 
602 ;    Stone  v.  Rottman,  1S3  Mo.  552,  82  S.  W.  76 ;    Swentzel  v.  Peun 


302  BANKING   CORPORATIONS  (Ch.  9 

In  a  leading  case  involving  the  responsibility  of  directors  in 
national  banks — and  it  seems  that  the  same  standard  applies 
to  directors  of  other  banks — it  was  said :  "In  any  view  the  de- 
gree of  care  to  which  these  defendants  were  bound  is  that 
which  ordinarily  prudent  and  diligent  men  would  exercise  un- 
der similar  circumstances,  and  in  determining  that  the  restric- 
tions of  the  statute  and  the  usages  of  business  should  be  taken 
into  account.  What  may  be  negligence  in  one  case  may  not  be 
want  of  ordinary  care  in  another,  and  the  question  of  negli- 
gence is  therefore  ultimately  a  question  of  fact,  to  be  deter- 
mined under  all  the  circumstances."  It  appearing  that  the  af- 
fairs of  the  bank  were  managed  by  its  president,  who  had  the 
reputation  of  being  trustworthy  and  efficient,  and  who  owned 
a' greater  part  of  the  stock,  and  that  the  bank  was  generally 
considered  to  be  in  a  prosperous  condition,  it  was  held  that 
directors  could  not  be  held  liable  for  losses  through  misman- 
agement on  the  ground  of  negligence,  in  that  they  did  not, 
within  90  days  after  they  became  directors,  compel  the  board 
to  make  a  thorough  investigation  of  the  books  and  condition 
of  the  bank.  "We  are  of  opinion,"  said  the  court,  "that  these 
defendants  should  not  be  subjected  to  liability  upon  the  ground 
of  want  of  ordinary  care,  because  they  did  not  compel  the  board 
of  directors  to  make  such  an  investigation,  andl  did  not  them- 
selves individually  conduct  an  examination  during  their  short 
period  of  service,  or  because  they  did  not  happen  to  go  among 
the  clerks  and  look  through  the  books,  or  call  for  or  run  over 
the  bills  receivable.  Of  course,  a  thorough  examination  would 
have  ascertained  that  the  bank  ought  to  be  put  into  liquidation 
at  once."  ^" 

Bank,  147  Pn.  140,  23  Atl.  4<(.-..  415,  15  L.  R.  A.  305,  30  Am.  St.  Rep. 
718.  See  "Banlcs  and  Banhinff,"  Dec.  Dig.  {Key  jV'o.)  §  5-J;  Cent. 
Dig.  §§  9,3-207. 

141  Briggs  V.  Spaulding,  141  U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed. 
662.  See,  also,  Gibbons  v.  Anderson  (C.  C.)  SO  Fed.  345;  Rankin 
V.  Cooper  (C.  C.)  149  Fed.  1010.  .See  "Banks  and  Banking"  Dec. 
Dig.  {Key  'No.)  §  5^;    Cent.  Dig.  §§  0^-101. 


§§    76-78)  LIABILITY    OF   OFFICERS    TO    BANK    "^  303 

The  directors  of  a  bank  may  properly  intrust  to  the  cashier 
the  discretionary  powers  which  appertain  to  the  imniecHate 
management  of  the  business,  inchiding  the  discounting  of  pa- 
per, and  they  are  not  responsible  for  his  malversations  unless 
their  own  proper  care  would  have  prevented  the  loss ;  nor  are 
they  required  to  take  unusual  precaution  when  they  have  no 
reason  to  distrust  the  integrity  and  efficiency  of  the  cashier  and 
other  employes ;  but  directors  who  are  especially  charged'  with 
the  duty  of  examining  the  bank's  condition  and  securities  are 
responsible  for  losses  which  result  from  their  failure  to  per- 
form such  duty  with  reasonable  care  and  diligence. ^*^ 

1*2  The  cashier  of  a  national  bank  permitted  an  outside  corpo- 
ration, in  which  he  was  interested,  to  become  indebted  to^  the 
banlj,  through  overdrafts  and  notes  of  its  members,  discounted  to 
the  amount  of  $72,000,  which  was  the  chief  cause  of  the  bank's 
failure.  The  directors  had  an  examining  committee  and  a  com- 
mittee on  discounts,  whose  duty  it  was  to  examine  the  bank's  con- 
dition and  securities  periodically.  In  fact,  the  committees  made 
no  independent  examination,  but  merely  checked  the  notes  by  a  list 
furnished  by  the  cashier.  One  of  such  lists,  which  was  approved 
some  months  before  the  failure,  showed  eight  notes  for  $.5,000 
each;  but.  althougli  the  capital  of  the  bank  was  but  $50,000,  the 
members  of  the  committee  to  whom  the  list  was  furnished  had  no 
recollection  of  having  seen  such  notes,  nor  did  they  "know  of  the 
large  indebtedness  of  the  corporation.  Held,  that  the  members  of 
the  committees  were  guilty  of  negligence  which  rendered  them 
liable  for  the  losses  resulting  from  the  mismanagement  of  the 
cashier,  but  that  the  other  directors  were  not  liable;  it  not  ap- 
pearing that  they  had  knowledge  of  the  negligent  manner  in  which 
the  committees,  on  whose  reports  they  relied,  had  performed  their 
duties.  Warner  v,  Penoyer,  91  Fed.  587,  33  C.  C.  A.  222,  44  L.  R. 
A.  7G1. 

Directors  of  a  national  bank  left  its  managemexit  for  more  than 
three  years  almost  wholly  to  its  cashier,  who  had  but  little  prop- 
erty, and  of  whom  they  required  no  bond ;  and  they  knowingly 
permitted  loans  to  be  made  to  individuals  and  firms  largely  in  ex- 
cess of  the  amounts  allowed  by  law.  They  also  failed  to  record 
mortgages  given  to  secure  large  debts  due  the  bank,  even  after  they 
were  aware  of  its  insolvency,  and  erroneously  advised  an  ex- 
aminer, who  had  taken  charge  of  the  bank,  that  it  was  not  neces- 


304  BANKING   CORrORATION3  (Ch.  9 

Remedies  Against  Officers 

As  in  the  case  of  other  corporations,  where  a  loss  results  -to 
a  banking  corporation  by  reason  of  the  fraud,  wrong,  or  neg- 
ligence of  its  directors  or  other  officers,  the  corporation  may- 
maintain  an  action  at  law  to  recover  damages  or  a  suit  in 
equity  to  compel  an  accounting.  The  suit  should  ordinarily 
be  brought  by  the  corporation,  for  the  injury  is  to  it,  and  not 
to  the  individual  stockholders.  The  directors  or  other  officers 
are  not  the  agents  of  the  stockholders,  but  of  the  corporation, 
and  therefore  at  law  the  corporation  alone  can  sue.  But  where 
the  directors  cannot  or  will  not  institute  suit  in  the  name  of  the 
corporation,  and  relief  cannot  be  had  by  applying  to  a  stock- 
holders' meeting,  a  stockholder  may  maintain  a  suit  in  equity 
for  the  benefit  of  the  corporation.  These  are  matters  of  gen- 
eral corporation  law,  and  are  not  peculiar  to  banking  corpora- 
tions.^*' 

Liability  to  Creditors 

The  creditors  of  an  insolvent  corporation,  in  order  to  pro- 
cure satisfaction  of  their  claims,  may  enforce  the  liability  of 
directors  and  other  officers  of  the  corporation  for  losses  re- 
sulting from  their  negligence  and  dishonesty  in  the  manage- 
ment of  the  corporate  affairs.  The  right  of  action  in  such  cas- 
es is  sometimes  based  upon  the  ground  that  the  assets  of  the 
corporation  are  a  trust  fund  for  the  benefit  of  the  creditors 
and  that  the  officers  are  trustees  for  their  benefit.  The  trust 
fund  doctrine  has  been  virtually  exploded  by  the  decisions  of 
the  courts  of  the  highest  authority,  and  properly  speaking  no 
trust  relation  exists  between  the  officers  and  the  creditors  of 
a  corporation.^**    The  true  basis  of  the  right  of  the  creditors 

saiy  to  record  them.  Held,  that  the  directors  were  personally  liable 
for  the  losses  caused  by  such  neglect  and  mismanagement  and  the 
fraud  and  defalcations  of  the  cashier.  Robinson  v.  Hall,  63  Fed. 
222,  12  C.  O.  A.  674.  See  "Banks  and  Bankinff,"  Dec.  Dig.  (Key  No.) 
§  54;   Cent.  Dig.  §§  92-107. 

143  See  Clark,  Corp.  (2d  Ed.)  506;    post,  p.  400. 

1*4  Briggs  V.  Spaulding,  141  U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed. 


§§    76-78)  LIABILITY    OP    OFFICERS    TO    BANK  305 

to  proceed  against  the  officers  is  the  right  to  reach  equitable 
assets  of  the  corporation  and  to  apply  them  to  the  satisfac- 
tion of  their  claims.  The  officers  being  liable  to  the  corporation 
for  losses  caused  by  their  fraud,  gross  negligence,  or  willful 
breach  of  duty,  this  liability  may  be  enforced  by  or  for  the 
benefit  of  the  creditors  when  the  corporation  becomes  insolvent. 
The  above  considerations  apply  to  depositors,  as  well  as  other 
creditors,  of  a  bank  ;  the  directors,  as  agents  of  the  corporation, 
being  liable  only  to  it  for  their  breach  of  duty,^*"^  and  liable 
to  the  depositors  only  indirectly  through  the  corporation  when 
it  becomes  insolvent.  That  the  officers  are  thus  liable  to  cred- 
itors, when  by  reason  of  their  negligence  or  dishonesty  in 
the  performance  of  their  diuties  the  bank  has  been  subjected  to 
loss,  and  in  consequence  the  assets  of  the  bank  are  insufficient 
to  pay  its  debts,  is  well  established.^*' 

It  follows  that  the  remedy  of  the  creditor  is  not  by  action 
at  law  against  the  guilty  officers,^*''  although  there  are  cases 

6G2 ;  ante,  p.  301.  See  Clark,  Corp.  (2(1  Ed.)  526,  594.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  57;    Cent.  Dig.  §§  108-110. 

145  Ante,  p.  304. 

140  Foster  v.  Bank  of  Abington  (C.  C.)  88  Fed.  604;  Trustees  of 
Mutual  Building  Fund  &  Dollar  Savings  Bank  v.  Bossieux  (D.  C.) 
3  Fed.  817 ;  Bank  of  St.  Mary's  v.  St.  John,  25  Ala.  566 ;  Campbell 
V.  Watson,  62  N.  J.  Eq.  396,  50  Atl.  120;  Marshall  v.  Farmers'  & 
Mechanics'  Sav.  Bank  of  Alexander,  85  Va.  676,  8  S.  E.  586,  2  L. 
R.  A.  534,  17  Am.  St.  Rep.  84 ;  Gores  v.  Day,  99  Wis.  276,  74  N.  W. 
787.  See  "Banks  and'  Banking,"  Dec.  Dig.  (Key  No.)  §  57;  Cent. 
Dig.  §§  108-110. 

147  Union  Nat.  Bank  y.  Hill.  148  Mo.  380,  49  S.  W.  1012,  71  Am. 
St.  Rep.  615 ;  Hart  v.  Hanson,  14  N.  D.  570,  105  Wis.  942,  3  L.  R.  A. 
(N.  S.)  438.  See,  also,  Killen  v.  State  Bank,  106  Wis.  546,  82  N.  W. 
536. 

Cases  of  receiving  deposits  with  knowledge  of  the  bank's  insol- 
vency are  to  be  distinguished.  This  is  a  fraud,  and  a  director  or 
other  officer  who  takes  part  therein  is  liable  directly  to  the  de- 
positors for  losses  suffered  thereby.  Cassidy  v.  Uhlmann,  170  N. 
Y.  505,  63  N.  E.  554.  See,  also,  Delano  v.  Case,  121  111.  247,  12  N. 
E.  676,  2  Am.  St.  Rep.  81.    Cf.  Baxter  v.  Coughlin,  70  Minn.  1,  72  N. 

Tife.Bks.&  B.— 20 


306  BANKING  CORPORATIONS  (Ch.  9 

to  the  contrary.^*^  The  remedy  is  by  bill  in  equity,  in  which 
the  corporation  itself  should  be  made  a  party,  in  order  to  pro- 
tect the  directors  from  being  called  to  account  a  second  time, 
and  in  which  all  the  creditors  should  be  made  parties,  or  the 
bill  be  filed  on  behalf  of  the  complainant  and  all  others  stand- 
ing in  the  same  situation,  so  as  to  enable  them  to  come  in 
under  the  decree.^*®  Unlike  a  stockholder,  a  creditor,  before 
he  can  maintain  a  suit  to  assert  rights  properly  enforceable  by 
the  corporation  itself,  is  not  required  first  to  seek  to  procure 
action  by  the  corporation. ^''°  Of  course,  where  the  corporation 
is  in  the  hands  of  a  receiver  or  assignee,  as  the  representative 
of  all  concerned,  he  is  the  proper  party  to  maintain  an  action. ^^^ 
But,  if  he  declines  to  sue,  the  suit  may  be  maintained  by  the 
creditors. ^^^ 
Statutory  Liability 

In  many  states  it  is  provided  by  statute  that  the  directors 
or  other  officers  of  banking  corporations  shall  be  liable  for  its 
debts,  when  they  are  guilty  of  certain  acts  of  official  miscon- 

W.  797.    See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  57;   Cent. 
Dig.  §§  108-110. 

148  Solomon  v.  Bates,  118  N.  C.  311,  24  S.  E.  478,  54  Am.  St.  Rep. 
725 ;  Tate  v.  Bates,  118  N.  C.  287,  24  Ss  E.^  482,  54  Am.  St.  Rep. 
719.  See  "Banlcs  and  Banking,"  Dec.  Dig.  (Key  No.)  §  58;  Cent. 
Dig.  §  111. 

149  Chester  v.  Halliard,  36  N.  J.  Eq.  313;  Cmmiugham  v.  Pell,  5 
Paige  (N.  Y.)  G07.  See,  also,  Marshall  v.  Farmers'  &  Merchants'  Sav. 
Bank  of  Alexander.  85  Va.  676,  8  S.  E.  586,  2  L.  R.  A.  534.  17  Am. 
St.  Rep.  84.  Cf.  Deaderick  v.  Bank  of  Commerce,  100  Tenu.  457, 
45  S.  W.  786.  See  "Banlcs  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
58;    Cefit.  Dig.  §  116. 

150  Foster  v.  Bank  of  Abingdon  (C.  C.)  88  Fed.  ^04.  •  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §§  58,  154. 

131  Stone  V.  Rottman,  183  Mo.  552,  82  S.  W.  76;  Campbell  v. 
Watson,  62  N.  J.  Eq.  396,  50  Atl.  120;  Warner  v.  McMullin,  131 
Pa..  370,  18  Atl.  1056.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
A'o.)  §§  5Jt,  58;  Cent.  Dig.  §§  111-120. 

152  Gores  v.  Murphy,  109  Wis.  40S,  S4  X.  W.  867.  85  X.  W.  411. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  55;  Cent.  Dig.  §§ 
i)!i-10J,. 


§§    76-78)  LIABILITY    OF   OFFICERS   TO    BANK  307 

duct;  ^^^  while  certain  other  acts  on  their  part  are  denounced 
as  crimes.     A  consideration  of  the  statutory  Hability  of  bank 
officers,  civil  or  criminal,  is  beyond  the  scope  of  thiiJbpok:.    The 
provisions  of  the  National  Bank  Act  imposing  such  liabilities  ^. 
upon  national  banks  will  be  considered.^"** 

1B8  See  Clark,  Corp.  (2d  Ed.)  597.  i54  Post,  p.  398. 


303  EEPKESENTATJOiN'   OF    BANK  BY   OFFICERS  (Ch.  10 

CHAPTER  X 

REPRESENTATION  OF  BANK  BY  OFFICERS 

79.  In  General. 

80.  Directors. 

81.  President. 

82.  Cashier. 

'    83.  .  Tellers  and  Subordinate  Officers. 

84.  Admissions  and  Representations. 

85.  Notice — In  General. 

86.  Disclosure  Against  Interest 

IN  GENERAL 

79.  A  bank,  whether  incorporated  or  unincorporated,  is 
bound  by  the  acts  and  contracts  of  its  officers,  un- 
der the  rules  of  agency  appUcable  to  other  persons 
and  corporations. 

Banks,  whether  incorporated  or  unincorporated,  necessarily 
act  through  agents,  and  certain  of  these  agents  by  usage  are 
invested  with  more  or  less  well-defined  powers.  The  matters 
to  be  considered  in  this  chapter  relate  largely  to  the  law  of 
agency.  Most  of  these  matters,  indeed,  relate  especially  to  the 
representation  of  banking  corporations  by  their  officers;  but 
the  powers  of  the  officers  of  a  corporation  over  its  business  and 
property  are  strictly  powers  of  agents — powers,  either  confer- 
red by  charter,  or  delegated  to  them  by  the  directors,  in  whom, 
as  representatives  of  the  corporation,  the  control  of  its  business 
and  property  is  vested.  Like  agents  of  natural  persons,  they 
can  bind  their  principal,  the  corporation,  only  within  the  scope 
of  their  authority,  actual  or  apparent,  except  where  the  cor- 
poration may  be  estopped  to  deny  that  the  agent  so  acted.^ 

1  Clarlc.  Corp.  (2d   Ed.)  4S0. 


§   80)  DIRECTORS  309 

DIRECTORS 

80.  The  general  management  of  a  banking  corp«^?ation  is 
ordinarily  by  the  charter  intrusted  to  a  board  of 
directors,  which  has  the  power  to  bind  the  bank  by 
any  act  or  contract  within  the  powers  conferred 
upon  the  corporation.  The  board  may  ordinarily 
appoint  the  other  officers  and  agents  of  the  bank 
and  define  their  duties,  and  may  delegate  an  au- 
thority, not  involving  the  exercise  of  a  discretion 
vested  in  it,  to  one  of  their  own  number,  or  to  a 
third  person,  to  do  acts  for  the  bank. 

in  General 

Usually  the  management  of  a  banking  corporation  is  vested 
in  a  board  of  directors,  elected  by  the  stockholders,  and  the 
directors  appoint  other  officers  and  agents.  Generally  the 
directors  are  required  to  be  stockholders,  and  sometimes  the 
directors,  or  some  of  them,  are  required  to  be  residents  of  the 
state.^  When  the  directors  are  given  the  management  and 
control  of  the  corporation,  and  there  are  no  express  limitations 
on  their  powers,  they  may  make  any  contracts  and  perform  any 
acts  which  may  be  necessary  or  proper  to  enable  the  corpo- 
ration to  accomplish  the  purposes  of  its  creation.^  Thus,  they 
may  borrow  money  when  necessary,*  pledge  the  bank's  faith 
in  the  execution  of  their  trust, ^   assign  over  its  securities,* 

2  Post,  p.  397.  3  Clark,  Corp.  (2d  Ed.)  471. 

4  Western  Kat.  Bank  v.  Armstrong,  152  U.  S.  346,  14  Sup.  Ct.  572, 
;«  L.  Ed.  470 ;  Leavitt  v.  Yates,  4  Edw.  Ch.  (X.  Y.)  134 ;  ante,  p.  282. 
>S'ee  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  102;  Cent.  Dig. 
§  2J,0. 

5  State  V.  Bank  of  Louisiana,  5  Mart:  N.  S.  (La.)  327. 

They  may  not  pledge  future  earnings  without  authority  of  stock- 
holders. Brown  v.  Bradford,  103  Iowa,  378,  72  N.  W.  64S.  See 
''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  105;  Cent.  Dig.  §§  249- 
252. 

6  Stevens  v.  Hill,  2!)  Me.  133 ;  President,  etc.,  of  Northampton 
Rank  v.  Pepoon,  11  Mass.  288;    Cross  v.  Rowe,  22  N.   H.   77.     See 


310  REPRESENTATION   OF  BANK   BY   OFFICERS  (Ch.  10 

release  or  compromise  a  claim  or  an  action/  and  even  au- 
thorize an  assignment  of  the  bank's  property  for  the  benefit 
of  creditors,  when  in  failing  circumstances.^ 

On  the  other  hand,  the  directors  can  lawfully  do  no  act 
that  is  not  within  the  powers  conferred  upon  the  corporation, 
and  if  they  attempt  to  do  so,  and  relief  cannot  be  obtained 
through  the  corporation,  a  stockholder  m.ay  maintain  a  suit 
to  enjoin  them.^  Unauthorized  acts,  however,  if  within  the 
powers  of  the  corporation,  may  be  ratified  by  the  stockhold- 
ers.^ °  Acts  not.  within  the  powers  of  the  corporation  may  not 
be  biifding  upon  it,  because  they  are  ultra  vires,  or  may  be  a 
ground  for  forfeiture  of  the  charter.^^ 
Appointmenf  of  Agents 

The  board  of  directors,  having  the  general  superintendence 
and  management  of  the  affairs  of  the  corporation,  constitute 
the  corporation  for  all  purposes  of  dealing  with  others  on  its 
behalf.^ 2     Not  only  have  they  ordinarily  express  authority  to 

"Banls   and  Banking,''  Dec.  Dig.   {Key   'So.)   §   109;    Cent.  Dig.   §§  ' 
251-260. 

T  Wolf  V.  Bureau,  1  Mart.  N.  S.  (La.)  162 ;  Frankfort  Bank  v.  John- 
son, 24  Me.  490;  Baird  v.  Bank  of  Washington,  11  Serg.  &  R.  (Pa.) 
411 ;    Olney  v.  Chadsey,  7  R.  I.  224. 

■  They  cannot  release  an  original  subscriber  to  the  stock,  nor  make 
any  arrangement  whereby  the  bank,  its  creditors,  or  the  state  shall 
lose  any  of  the  benefit  of  his  subscription.  McNulta  v.  Corn  Belt 
Bank,  1G4  111.  427,  45  N.  E.  954,  5G  Am.  St.  Rep.  203.  See  ''Banka 
and  Banking:'  Dec.  Dig.  {Key  So.)  §  110;   Cent.  Dig.  §§  2G.5-2G8. 

8  National  Bank  of  Commerce  v.  Shumway,  49  Kan.  224,  30  Pac. 
411;  Merrick  v.  Trustees  of  Bank  of  Metropolis,  8  Gill  (Md.)  59; 
Town  V.  President,  etc.,  of  Bank  of  River  Raisin,  2  Doug.  (Mich.) 
530;  Dana  v.  Bank  of  United  States,  5  Watts  «&  S.  (Pa.)  223.  Cf. 
Gibson  v.  Goldthwaite,  7  Ala.  281,  42  Am.  Dec.  592.  See  -'Banks  and 
Banking;'  Dec.  Dig.  (Key  No.)  §  10.',;   Cent.  Dig.  §§  2J,6-2J,8. 

9  Ante,  p.  290. 

10  Clark,  Corp.  (2d  Ed.)  473. 

11  Ante,  p.  289. 

12  Percy  v.  Millaudon,  3  La.  5GS;  Burrill  v.  President,  etc.,  of 
Nahant  Bank,  2  Mete.  (Mass.)  1G3,  35  Am.  Dec.  395.  See  ''Banks  and 
Banking,"  Dec.  Dig.  (Key  So.)  §  102;   Cent.  Dig.  §§  239-2J,8. 


g    SO)  DIRECTORS  311 

appoint  the  other  officers  and  agents  of  the  hank  and  to  de- 
fine their  duties,  but  a  board  of  directors  may  delegate  an 
authority  to  a  committee,  or  to  one  of  their  nuH#rer,  or  to 
some  other  officer  or  person,  to  do  acts  for  the  corporation, 
unless  the  acts  can  by  the  charter  be  done  only  by  themselves. ^^ 
Thus,  they  may  authorize  one  of  their  number,  or  some  of- 
ficer, to  assign  over  securities,^*  or  to  borrov^r  money/^ 

The  cashier,  and  to  some  extent  the  other  officers,  have  more 
or  less  well-defined  powers,  and,  like  other  agents,  they  may 
bind  their  principal  within  the  scope  of  their  customary  or 
apparent  authority.  The  directors  may,  of  course,  define  the 
duties  of  the  officers,  and  thereby  expressly  confer  upon  them 
authority  larger  than  that  customarily  incident  to  their  offices. 
And  the  directors  may  also,  by  permitting  an  officer  to  exercise 
powers  other  than  those  customarily  incident  to  his  office,  or 
other  than  the  powers  expressly  conferred,  impliedly  authorize 
him  to  exercise  such  other  powers.^ ^  An  officer  may  have 
power,  however,  to  bind  the  bank,  although  he  exceeds  the 
customary  authority  of  his  office,  and  the  authority  actually 
conferred  upon  him ;  for  if  the  directors  have,  by  acquiescing 
in  or  shutting  their  eyes  to  the  general  course  of  dealing  in 
the  bank,  permitted  the  officer  to  hold  himself  out  as  having 
certain  powers,  his  acts  within  such  general  course  of  dealing 
will  be  binding  on  the  bank.     "Directors  cannot,  in  justice  to 

13  Stamford  Bank  v.  Benedict,  15  Conn.  437;  Wallace' v.  Exchani?e 
Bank  of  Speucer,  12G  Ind.  2G.5,  26  N.  E.  175 ;  Waxahachi  Nat.  Bank  v. 
Vickery  (Tex.  Civ.  App.)  26  S.  W.  876 ;  First  Nat.  Bank  of  Wellsburg 
V.  Kimberlands,  16  W.  Va.  555.    See  "Banks  and  BanLinfi,"  Dec.  Dig. 

Key  No.    §§  102-112;  Cent.  Dig.  §§  239-212. 

14  Stevens  v.  Hill,  29  Me.  133;  Merrick  v.  Trustee.s  of  Bank  of 
Metropolis,  8  Gill  (Md.)  59;  President,  etc.,  of  Northampton  Bank 
V.  Pepoon,  11  Mass.  288.  See  "Banks  and  Banking,"  Dec.  Dig.  [Key 
No.)  §  104;    Cent.  Dig.  §  2J,6. 

15  Ridgway  v.  Farmers'  Bank  of  Bucks  County,  12  Serg.  &  E.  (Pa.) 
256,  14  Am.  Dec.  681.  See  "Banks  and  Banking,"  Deo.  Dig.  (Key  No.) 
§  105;    Cent.  Dig.  §  250. 

16  Post,  p.  315. 


312  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

those  who  deal  with  the  bank,  shut  their  eyes  to  what  is  go- 
ing on  around  them.  It  is  their  duty  to  use  ordinary  diligence 
in  ascertaining  the  condition  of  its  business,  and  to  exercise 
reasonable  control  and  supervision  of  its  ofificers.  They  have 
something  more  to  do  than,  from  time  to  time,  to  elect  the  of- 
ficers of  the  bank,  and  to  make  declarations  of  dividends. 
That  which  they  ought,  by  proper  diligence,  to  have  known 
as  to  the  general  course  of  business  in  the  bank,  they  may 
be  presumed  .to  have  known  in  any  contest  between  the  cor- 
poration and  those  who  are  justified  by  the  circumstances  in 
r'ealing  with  its  officers  upon  the  basis  of  that  course  of  busi- 
ness." ^' 
Must  Act  as  a  Board 

The  government  and  management  of  the  corporate  afifairs 
is  vested  in  the  directors  as  a  board,  and  not  otherwise.^ ^ 
The  separate  action  of  one  or  all  of  the  directors  individually 
is  not  the  action  of  the  body  clothed  with  the  corporate  powers, 
and  does  not  bind  the  corporation.^* 

Ratification 

The  board  may,  of  course,  ratify  and  render  valid  an  act 
done  without  previous  authority,  if  they  could  have  authorized 
it ;  and  they  may  do  so  impliedly,  as  well  as  expressly,  as  by 
recognizing  the  act  as  binding,  and  acting  upon  it.^" 

17  Martin  v.  Webb,  110  U.  S.  7,  3  Sup.  Ct.  428,  28  L.  Ed.  49;  post, 
p.  316.  See  "Banks  and  Banldng,"  Dec.  Big.  (Eeij  No.)  §§  113,  114; 
Cent.  Dig.  §§  273-280. 

18  Louisiana  State  Bank  v,  Senecal,  13  La.  525.  Cf.  National  Bank 
of  Commerce  v.  Shumway,  49  Kan.  224,  30  Pac.  411.  See  "Banks 
and  Bunking,"  Dec.  Dig.  {Key  No.)  §  102;   Cent.  Dig.  §  2^0. 

19  First  Nat.  Bank  v.  Drake,  35  Kan.  564,  11  Pac.  445,  57  Am.  Ifep. 
193;  Clark,  Corp.  (2d  Ed.j  475;  post,  p.  337.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  102;   Cent.  .Dig.  §  2^0. 

2  0  American  Esch.  Nat.  Bank  v.  First  Nat.  Bank,  82  Fed.  9C1.  27 
C.  C.  A.  274;  Roe  v.  Bank  of  Versailles.  1G7  Mo.  40G,  G7  S.  W.  303; 
W'yckoff,  Church  &  Partridge  v.  Riverside  Bank,  135  App.  Div.  400, 
119  N.  Y.  Supp.  937;  Winton  v.  Little,  94  Pa.  64.  See,  also.  People's 
Bank  v.  Manufacturers'  Nat.  Bank,  101  U.   S.  181,  25  L.   Ed.   9u7 ; 


81)        -  PRESIDENT  313 


PRESIDENT 

81.  The  authority  of  the  president,  other  than  such  as  he 
may  have  as  a  director  when  he  is  a  member  of  the 
board,  has  been  declared  to  be  Hmited  to  taking 
charge  of  the  litigation  of  the  bank;  but  greater 
authority  is  commonly  conferred  upon  him,  either 
expressly  or  by  implication,  and  more  recently 
some  courts  have  declared  that  he  has  authority  to 
indorse  negotiable  paper  in  the  ordinary  course  of 
the  bank's  business  and  to  perform  other  acts  cus- 
tomarily performed  by  the  cashier,  such  as  drawing 
drafts  and  checks,  certifying  checks,  and  issuing 
certificates  of  deposit. 

The  president  is  usually  a  director,  and  as  such  has  the 
authority  of  a  member  of  the  board.  As  president,  his  in- 
herent authority  is  small.  Greater  authority  than  belongs  to 
him  merely  ex  officio  may  be  conferred  upon  the  president 
by  the  charter,  or  by  the  directors,  either  expressly  ^^  or  by 
implication.--     It  is  said  that  the  only  function  falling  within 

Western  Nat.  Bank  v.  Armstrong,  152  U.  S.  346,  14  Sup.  Ct.  572,  38  L. 
Ed.  470;  Eastern  Townships  Bank  v.  Vermont  Nat.  Bank  (C.  C.)  22 
Fed.  186;  Blanchard  v.  Commercial  Bank,  75  Fed.  249,  21  C.  C.  A. 
319 ;  Clark,  Corp.  (2d  Ed.)  4S6.  See  "Banks  and  Banlcing,"  Deo.  Din. 
(Ken  A'o.)  §  lilt;   Cent.  Dig.  §§  277-280. 

21  First  Nat.  Bank  v.  National  Park  Bank  of  New  York  (C.  C.) 
175  Fed.  881 ;  Boyd's  Ex'r  v.  First  Nat.  Bank  of  William.sburg,  128 
Ky.  468,  108  S.  W.  360;  Ex  parte  Rickey,  31  Nev.  82,  100  Pac.  134, 
135  Am.  St.  Rep.  651 ;  Cake  v.  Pottsville  Bank,  116  Pa.  264,  9  Atl. 
302,  2  Am.  St.  Rep.  600;  First  Nat.  Bank  of  Wellsburg  v.  Kimber- 
lands,  16  W.  Va.  555.  >S'ec  ''Banlcs  and  Banldng,"  Dec.  Dig.  (Key  No.) 
§  102;   Cent.  Dig.  §  2//2. 

22  Armstrong  v.  Chemical  Nat.  Bank,  S3  Fed.  5.50,  27  C.  C.  A.  601 ; 
Reno  V.  .James,  16  Ky.  Law  Rep.  60 ;  NeifCer  v.  Bank  of  Knoxville,  1 
Head  (Tenn.)  162. 

Authority  may  be  conferred  by  a  general  usage.     Armstrong   v. 


314  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

his  inherent  power  is  to  take  charge  of  the  htigation  of  the 
baVik.-^  '  He  may  employ  counsel,  and  appear  for  the  bank.-* 
It  has  also  been  said  that  the  decisions  for  the  most  part 
are  decisions  to  the  eftect  that  the  president  had  no  right  by 
virtue  of  his  office  to  perform  some  particular  act.^^  Thus 
it  has  been  held  that  the  president,  as  such,  has  not  authority  to 
sell  the  property  of  the  bank,^^  to  execute  a  mortgage  on 
its  real  estate,-'''  to  borrow  money, ^^  to  waive  conditions  of 
a  contract  for  the  sale  of  land,^''  or  to  release  a  claim.^" 

Chemical  Nat.  Bank,  83  Fed.  556,  27  C.  C.  A,  601.  See  "Banks  and 
Bankings  Dec.  Dig.  {Key  No.)  §  102;    Cent.  Dig.  §  2)2. 

2  3  Morse.  Banks  &  B.  (4th  Ed.)  §  143. 

2  4  Russell  V.  Washington  Savings  Bank,  23  App.  D.  C.  398;  Citi- 
zens' Nat.  Bank  of  Kingman  v.  Berry,  53  Kan.  696,  37  Pac.  131,  24 
L.  R.  A.  719 ;  Savings  Bank  of  Cincinnati  v.  Benton,  2  Mete.  (Ky.) 
240 ;  Merchants'  Nat.  Bank  v.  Eustis,  8  Tex.  Civ.  App.  350.  28  S.  W. 
227.    Bnfe  see,  Pacific  Bank  v.  Stone.  121  Cal.  202,  53  Pac.  634. 

He  has  aiithority  by  virtue  of  his  office  to  make  a  valid  assign- 
ment of  a  judgment  in  favor  of  the  bank.  Guernsey  v.  Black  Dia- 
mond Coal  &  Mining  Co.,  99  Iowa,  471,  68  N.  W.  777.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  110;   Oent.  Dig.  §  267. 

2  5  Morse,  Banks  &  B.  (4th  Ed.)  §  143. 

26Asher  v.  Sutton,  31  Kan.  286,  1  Pac.  535;  Greenawalt  v.  Wil- 
son, 52  Kan.  109,  34  Pac.  403;  First  Nat.  Bank  v.  Lucas,  21  Neb. 
280,  31  N.  W.  805;  Smith  v.  Lawson,  18  W.  Va.  212,  41  Am.  Rep. 
088  (to  indorse  or  transfer  notes).  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  104;   Cent.  Dig.  §  2Jf7. 

2  7  Leggett  V.  New  Jersey  Mfg.  &  Banking  Co.,  1  N.  J.  Eg.  541,  23 
Am.  Dec.  728.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  104; 
Cent.  Dig.  §  247. 

2  8  Western  Nat.  Bank  v.  Armstrong,  152  U.  S.  346,  14  Sup.  Ct.  572, 
38  L.  Ed.  470.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key.  No.)  § 
102;    Cent.  Dig.  §  242. 

2  9  Chadbourne  v.  Stockton  Savings  &  Loan  Soc,  101  Cal.  xvii,  36 
I'ac.  127.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  104; 
Cent.  Dig.  §  247. 

30  E.  Swindell  &  Co.  v.  Bainbridge  State  Bank,  3  Ga.  App.  364,  60 
S.  E.  13.  Wheat  v.  Bank  of  Louisville  (Ky.)  5  S.  W.  305 ;  State  Sav- 
ings Loan  &  Trust  Co.  v.  Stewart,  05  111.  App.  391;  Olney  v.  Chad- 
.sey,  7  R.  I.  224;    Hodge's  Ex'r  v.  First  Nat.  Bank,  63  Va.  51.     See, 


§    81j  PRESIDENT  315 

Whatever  are  the  inherent  powers  of  the  president,  he 
frequently  exercises  very  hroad  powers  with  the  consent  of 
the  directors,  and  when  they  permit  him  to  exer-«4ee  certain 
powers  his  authority  to  exercise  them  will  be  implied. ^'^  "It 
is  unnecessary  to  attempt  any  general  definition  of  the  duties 
of  the  respective  officers  of  banking  corporations,"  it  was 
said  in  a  recent  case.  "The  usage  is  not  uniform  in  different 
cities,  and  sometimes  not  the  same  in  different  institutions  in 
the  same  city.  Country  banks,  and  banks  in  small  towns  and 
cities,  have  different  rules  from  those  in  large  cities.  Of 
course,  there  are  certain  general  rules  as  to  the  duties  of  the 
cashier,  teller,  president,  or  directors.  Courts  have  oftentimes 
recognized  the  fact,  and  have  frequently  decided,  that  these 
officers  have  or  have  not  either  exclusive  or  concurrent  powers 
to  do  certain  acts  of  the  nature  designated  in  the  particular 
case.  Customs  have  sprung  up  from  the  necessity  and  the 
convenience  of  business  in  certain  localities,  and  have  prevailed 
in  duration  and  extent  until  they  have  acquired  in  such  local- 
ities the  force  of  law.  In  the  present  case  it  is  the  exceptional 
class  with  which  we  have  to  deal.  It  is  now  well  settled  by 
the  weight  of  reason  and  authority  that  whenever,  in  the  usual 
course  of  the  business  of  the  corporation,  the  president  or 
other  officer  has  been  allowed  to  manage  and  control  its  affairs, 
his  authority  to  represent  and  bind  the  corporation  may  be 
implied  from  the  manner  in  which  he  has  been  permitted  by 
the  trustees  or  directors  of  the  corporation  to  transact  its 
business.     The  acting  head  of  the   corporation,   whether  it 

also,  Arbogast  v.  American  Excli.  Nat.  Bank,  125  Fed.  518,  60  G.  C. 
A.  538 ;  Mead  v.  Pettigrew,  11  S.  D.  529,  78  N.  W.  945.  Cf.  Case  v. 
Hawkins,  53  Miss.  702.  See  "Banks  and  Banking,''  Dec.  Diff.  (Key 
No.)  §  102;   Cent.  Dig.  §  2.'i2. 

31  Cox  V.  Robinson,  82  Fed.  277,  27  C.  C.  A.  -120;  Hanover  Nat. 
Bank  v.  First  Nat.  Bank  of  Burlingame,  Kan.;  109  Fed.  421,  48  C.  C. 
A.  482;  Wells  Fargo  &  Co.  v.  Enright,  127  Cal.  G69,  60  Pac.  439, 
49  L.  R.  A.  647;  Steinki  v.  Yetzer,  108  Iowa,  512,  79  N.  W.  280; 
Griffin  v.  Erskine,  131  Iowa,  444,  109  N.  W.  13.  See  "Banks  and 
Ba-.ik'no,"  Dec.  Dig.  (Key  No.)  §§  102-110;    Cent.  Dig.  §§  2S9-2G8. 


316  REPRESENTATION   OF    BANK  BY   OFFICERS  (Ch.  10 

is  the  president,  vice  president,  cashier,  or  general  manager, 
through  whom  and  by  whom  the  general  and  usual  affairs 
of  the  corporation  are  transacted  which  custom  or  necessity 
has  imposed  upon  the  officer— such  acts  being  incident  to  the 
execution  of  the  trust  reposed  in  him — may  be  performed  by 
him  without  express  authority ;  and  in  such  cases  it  is  imma- 
terial whether  such  authority  exists  by  virtue  of  his  office,  or 
is  imposed)  by  the  course  of  business  as  conducted  by  the 
corporation."  ^^ 

And  where  the  directors  have  surrendered  the  business  to 
the  president  or  another  officer,  and  intrusted  the  manner  of 
the  execution  to  them,  third  persons  are  justified,  when  deal- 
ing with  the  officers,  in  assuming  that  they  have  the  powers 
which,  under  the  general  course  of  business  in  the  bank,  they 
seem  to  have.^' 

Indeed,  it  seems  that  it  is  the  tendency  of  the  courts  to- 
day to  assimilate  the  implied  powers  of  the  president,  as  chief 
executive  officer  of  the  bank,  to  those  of  the  cashier.^*  Thus, 
it  has  been  held  that  it  is  within  the  scope  of  the  implied 

32  Cox  V.  Robinson,  82  Fed.  277,  27  C.  C.  A.  120.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §§  102-110;   Cent.  Dig.  §§  239-268. 

3  3  Ante,  p.  311.  See,  also,  Auten  v.  United  States  Nat.  Bank,  174 
U.  S.  125,  19  Sup.  Ct.  628,  43  L.  Ed.  920;  Chemical  Nat.  Bank  of 
New  York  v.  Armstrong  (C.  C.)  76  Fed.  3.39,  affirmed  Aldrich  v. 
Chemical  Nat.  Bank,  176  U.  S.  618,  20  Sup.  Ct.  498,  44  L.  Ed.  Oil ; 
Cherry  v.  City  Nat.  Bank,  144  Fed.  587,  75  O.  C.  A.  343,  affirmed 
Rankin  v.  City  Nat.  Bank  of  Kansas  City,  208  U.  S.  541,  28  Sup.  Ct. 
346.  52  L.  Ed.  610;  Citizens'  Bank  &  Trust  Co.  v.  Thornton,  174 
Fed.  752,  98  C.  C.  A.  478 ;  First  Nat.  Bank  of  Indianapolis  v.  New, 
146  Ind.  411,  45  N.  E.  597;  City  Nat.  Bank  of  Hastings  v.  Thomas, 
46  Neb.  861,  65  N.  W.  895.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  102-109;   Cent.  Dig.  §§  239-2G0. 

2*  United  States  Nat.  Bank  v.  First  Nat.  Bank,  79  Fed.  296,  24 
C.  C.  A.  597;  Bartlett  Estate  Co.  v.  Fraser,  11  Cal.  App.  373,  105 
Pac.  130.  See,  also.  People's  Bank  v.  Manufacturers'  Nat.  Bank, 
101  U.  S.  181,  25  L.  Ed.  907 ;  Thomas  v.  City  Nat.  Bank  of  Hastings, 
40  Neb.  501,  58  N.  W.  943,  24  L.  R.  A.  263. 

He  has  general  authority  to  receive  a  deposit.     Hazelton  v.  Union 


§   81)  PRESIDENT  317 

powers  of  the  president  to  indorse  negotiable  paper  in  the 
ordinary  transaction  of  the  bank's  business,  and  that  a  spe- 
cial authority  to  that  end  need  not  be  conferred.  J^uch  im- 
pHed  power,"  it  was  said,  "is  generally  conceded  to  bank- 
cashiers,  and  we  know  of  no  sufficient  reason  why  the  implied 
powers  of  the  chief  executive  officer  of  a  bank  should  be 
more  limited  in  this  respect  than  those  of  its  cashier.  *  *  * 
It  can  hardly  be  expected  that  the  cashier  of  a  bank  will  be 
in  attendance  on  all  occasions  when  it  becomes  necessary  for 
the  bank  to  indorse  notes  and  bills,  draw  drafts  and  checks, 
certify  checks,  or  issue  certificates  of  deposit.  Such  trans- 
actions as  these  are  of  hourly  occurrence  in  all  banks  located 
in  large  business  centers,  and  the  exigencies  of  business  de- 
mand that  the  power  to  perform  such  acts  should  be  vested 
in  some  other  officer,  as  well  as  in  the  cashier.  Our  observa- 
tion teaches  us  that  such  power  is  very  generally  exercised 
by  bank  presidents ;  and  in  ordinary  transactions  no  layman, 
we  think,  would  hesitate  to  accept  negotiable  paper  which 
had  passed  through  a  bank,  because  it  was  indorsed  by  the 
president,  rather  than  by  the  cashier.  In  its  practical  opera- 
tion the  rule  that  a  bank  president  has  no  implied  power  to 
indorse  commercial  paper  for  and  in  behalf  of  his  bank  would 
seriously  interfere  with  the  transaction  of  business  and  put 
the   public   to  great   inconvenience,   while   it   would   have   no 

Bank  of  Columbus.  32  Wis.  34.  But  see  Bickley  v.  Commercial  Bauk, 
39  S.  C.  281,  17  S.  E.  977,  39  Am.  St.  Rep.  721.  In  Putnam  v.  Unit- 
ed States,  162  U.  S.  687,  16  Sup.  Ct.  923,  40  L.  Ed.  1118,  it  was  held 
that  the  president  of  a  national  hank  has  not  necessarily,  by  virtue 
of  his  office,  power  to  draw  checks  against  an  account  kept  by  his 
bank  with  another  bank. 

The  president  of  a  national  bank  has  no  power  inherent  in  his 
office  to  bind  the  bank  by  the  execution  of  a  note  in  its  name,  but 
power  to  do  so  may  be  conferred  on  him  by  the  directors,  either 
expressly,  by  resolution  to  that,  effect,  or  by  subsequent  ratification, 
or  by  acquiescence  in  transactions  of  a  similar  nature,  of  which  the 
directors  have  notice.  National  Bank  of  Commerce  v.  Atkinson  (C. 
C.)  55  Fed.  465.  Sec  '■Banks  and  Banking,"  Dec.  Dig.  {Key  .Yo.)  §§ 
102-109;   Cent.  Dig.  §§  239-260. 


318  REPRESKNTATION  OF    BANK  BY  OFFICERS  (Ch.  10 

marked  tendency  to  prevent  fraud  or  breaches  of  trust  on 
the  part  of  the  bank  officers.  The  public  interest  requires 
that  the  same  presumptions  should  attend  an  indorsement  made 
by  the  president  of  a  bank  which  exist  in  favor  of  an  indorse- 
ment made  by  a  cashier,  and  that  banks  should  be  held  bound 
by  acts  of  that  nature  when  done  by  either  of  such  officers  in 
the  ordinary  course  of  business."  ^^ 


CASHIER 

82.  The  cashier  is  the  executive  officer  through  whom  the 
financial  operations  of  a  bank  are  conducted,  and 
he  has  by  virtue  of  his  office  all  the  customary  au- 
thority necessary  for  the  discharge  of  such  duties, 
such  as  authority  to  receive  deposits  and  issue  cer- 
tificates of  deposit,  to  draw  and  certify  checks,  to 
indorse  negotiable  paper  in  the  ordinary  course  of 
business  and  for  collection,  to  buy  and  sell  ex- 
change, and  the  like.  Limitations  upon  his  custom- 
ary authority  may  be  imposed,  and  greater  au- 
thority may  be  expressly  or  impliedly  conferred, 
by  the  directors,  or,  if  the  bank  be  unincorporated, 
by  the  banker;  but  persons  dealing  with  him  in 
relation  to  matters  within  the  scope  of  such  cus- 
tomary authority  are  not  affected  by  limitations 
thereon  of  which  they  have  not  notice. 

In  General 

"The  cashier  is  the  executive  officer  through  whom  the 
whole  financial  operations  of  the  bank  are  conducted.  He  re- 
ceives and  pays  out  its  moneys,  collects  and  pays  its  debts, 
and  receives  and  transfers  its  commercial  securities.  Tellers 
and  other  subordinate  officers  may  be  appointed,  but  they  are 

3  5  United  States  Nat.  Bank  v.  First  Nat.  Bank,  79  Fed.  296,  24 
C.  C.  A.  597.  See  "Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §§  102- 
109.  262;   Cent.  Dig.  §§  239-260.  1001-1006. 


§  82)  CASHIKR  319 

under  his  direction,  and  are,  as  it  were,  the  arrns  by  which 
designated  portions  of  various  functions  are  discharged."  ''*' 
Being  the  bank's  executive  officer,  he  has,  in  the  absence  of 
positive  restrictions,  all  the  powers  necessary  for  such  an  of- 
ficer in  the  legitimate  business  of  banking/" 

The  inherent  or  customary  authority  with  which  the  cashier 
is  vested  by  virtue  of  his  office  is  consequently  large.  The 
directors  may  limit  this  authority  as  they  see  fit;  but  such 
limitations  will  not  affect  persons  who,  in  ignorance  of  such 
limitations,  deal  with  the  cashier  in  relation  to  matters  within 
the  scope  of  the  authority  ordinarily  confided  to  cashiers  as 
determined  by  usage.^^  So,  when,  in  the  exercise  of  the  cus- 
tomary authority  of  his  office,  he  draws  checks  or  makes  notes, 
his  signature  as  cashier  is  binding  on  the  bank,  although  the 
charter  may  provide  that  all  bills,  notes,  and  contracts  on  be- 
half of  the  bank  shall  be  signed  by  other  designated  officers.^" 

3  6  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,  19  L. 
Ed.  1008.  See  ''Banks  and  Banlcing,"  Dec.  Big.  {Key  No.)  §§  102-109, 
262;    Cent.  Dig.  §§  239-260,  1003. 

37  See,  West  St.  Louis  Savings  Bank  v.  Shawnee  County  Bank,  95 
U.  S.  557,  24  L.  Ed.  490 ;  Wakefield  Bank  v.  True.sdell,  55  Barh.  (N. 
Y.)  602;  Bissell  v.  First  Nat.  Bank  of  Franklin,  GO  Pa.  415.  See 
'•Banks  and  Banling,"  Dec.  Dig.  {Key  No.)  §§  102-109,  262;  Cent. 
Dig.  §§  239-260,  1003. 

3  8  Merchants'  Nat.  Bank  v.  State  N,at.  Bank,  10  Wall.  604,  19  L. 
Ed.  lOOS ;  Case  v.  Citizens'  Bank,  100  U.  S.  446,  25  D.  Ed.  605 ;  Mi- 
nor V.  Mechanics'  Bank,  1  Pet.  70,  7  L.  Ed.  47 ;  Fleckner  v.  Bank  of 
United  States.  8  Wheat.  360,  5  L.  Ed.  631 ;  ^latthews  v.  Massachu- 
setts Nat.  Bank,  Fed.  Cas.  No.  9,286,  1  Holmes,  396 ;  First  Nat.  Bank 
of  Birmingham  v.  First  Nat.  Bank  of  Newport,  116  Ala.  520,  22 
South.  976;  Bank  oi^  Yergennes  v.  Warren,  7  Hill  (N.  Y.)  91;  City 
Bank  of  New  Haven  v.  Perkins,  29  N.  Y.  554,  86  Am.  Dec.  332 ;  Cooke 
v.  State  Nat.  Bank,  52  N.  Y.  96,  11  Am.  Rep.  667 ;  Pattison  v.  Syra- 
cuse Nat.  Bank,  SO  N.  Y.  82,  36  Am.  Dec.  582 ;  Lloyd  v.  West  Branch 
Bank,  15  Pa.  172,  53  Am.  Dec.  581.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §§  102-109;    Cent.  Dig.  §§  239-260. 

3  9  Mechanics'  Bank  v.  Bank  of  Columbia,  5  W^heat.  326,  5  L.  Ed. 
100 ;   Carey  v.  McDougald,  7  Ga.  84 ;    Allison  v.  Hubbell,  17  Ind.  559. 


320  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

Of  course,  persons  dealing  with  the  cashier  with  notice  of  any 
limitation  upon  his  authority  can  acquire  no  rights  against  the 
bank  if  he  exceeds  his  actual  authority.'*"  And  persons  deal- 
ing with  him  are  charged  with  knowledge  of  his  apparent  or 
customary  authority,  and  if  he  exceeds  it  his  acts  are  not 
binding  upon  the  bank,  unless  he  had  actual  authority  to  per- 
form thC'  acts,*^  In  such  cases,  however,  it  is  not  necessary 
to  his  authority  to  bind  the  bank  that  the  directors  should 
have  expressly  conferred  upon  him  authority  to  perform  the 
acts  in  question.  If  the  directors  habitually  permit  him  to  ex- 
ercise powers  other  than  those  incident  to  his  ofifice,  his  au- 
thority to  exercise  them  will  be  implied.*^  And  if  the  directors 
leave  the  control  of  the  bank  to  the  cashier,  third  persons  in 
dealing  with  him  are  justified  in  assuming  that  he  has  the 

Hee  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  105,  109;  Cent. 
Dig.  §§  249-260. 

i«  Savannah  Bank  &  Trust  Co.  v.  Hartridge,  73  Ga.  223.  See 
''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  102-109;  Cent.  Dig.  §§ 
2S9-260. 

41  Farmers'  &  Mechanics'  Bank  v.  Troy  City  Bank,  1  Doug.  (Mich.) 
457.  See  "Batiks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  102-109; 
Cent.  Dig.  §§  239-260. 

42  Ante,  p.   311;  Carpy  v.  Dowdell,  115  Cal.  677,  47  Pac.  695. 

A  bank  cannot  recover  the  amount  collected  on  a  cashier's  draft 
issued  by  its  cashier  and  made  payable  to  his  individual  creditor, 
where  it  is  shown  that  the  cashier  had  on  numerous  previous  occa- 
sions drawn  similar  drafts  in  payment  of  his  own  debts,  and  such 
acts  had  continued  for  a  period  suiSiciently  long  to  establish  a  settled 
course  of  business  in  the  conduct  of  the  bank  which  had  been  sanc- 
tioned by  its  officers,  and  was  known,  or  should  have  been  known,  to 
its  directors.  Campbell  v.  National  Broadway  Bank,  130  Fed.  699,  65 
C.  C.  A.  664.  Of.  Gale  v.  Chase  Nat.  Bank,  104  Fed.  214,  43  C.  C.  A. 
496 ;  Rankin  v.  Chase  Nat.  Bank,  188  U.  S.  557,  23  Sup.  Ct.  372,  47 
L.  Ed.  594. 

Ac(iuiescence  by  the  officers  in  permitting  the  cashier  to  make 
loans  to  himself  does  not  estop  the  bank  from  claiming  that  such 
loans  are  illegal  under  the  state  banking  law.  Iowa  State  Sav. 
Bank  v.  Black,  91  Iowa,  490,  59  N.  W.  28;3.  See  "Banks  and  Banlc- 
ing,"  Dec.  Dig.  (Key  No.)  §§  102-109;   Cent.  Dig.  §§  239-260. 


^   82)  CASHIER  321 

powers  which  in  the  general  course  of  business  in  the  bank 
he  seems  to  have,  and  his  acts  within  such  limits  will  bind 
the  bank.*^  His  acts  on  behalf  of  the  bank  within  its^orporate 
powers  are,  of  course,  binding  upon  the  bank,  if  they  are 
ratified  by  the  directors. 

Powers  Inherent  in  Office 

The  powers  of  the  cashier,  which  belong  to  him  by  virtue 
of  his  office,  are,  in  general,  those  which  enable  him  as  an 
executive  officer  to  conduct  the  financial  operations  of  the  bank 
in  the  legitimate  business  of  banking.  Accordingly,  he  has 
authority  to  receive  deposits,^*  and  to  issue  certificates  of 
deposit  ;*°  to  draw  checks  upon  the  funds  of  the  bank  de- 
posited elsewhere;  *^   to  certify  checks;  *'^  to  buy  and  sell  ex- 

43  Ante,  p.  311 ;  Martin  v.  Webb,  110  U.  S.  7,  3  Sup.  Ct.  428,  28  L. 
Ed.  49 ;  Sherwood  v.  Home  Savings  Bank,  131  Iowa,  528,  109  N.  W. 
9 ;  Davenport  v.  Stone,  104  Mich.  ,521,  62  N.  W.  722,  53  Am.  St.  Rep. 
467 ;  Pattison  v.  Syracuse  Nat.  Bank,  80  N.  Y.  82,  36  Am.  Rep.  582 ; 
National  Bank  of  Tarentum  v.  Equitable  Trust  Co.  of  Pittsburg,  223 
Pa.  328,  72  Atl.  794.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key.  No.) 
§§  102-109;   Cent.  Dig.  §§  239-260. 

44  President,  etc.,  of  State  Bank  v.  Kain,  1  111.  75 ;  Hanson  v. 
Heard,  69  N.  H.  190,  38  Atl.  788.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  106;    Cent.  Dig.  §§  253-256. 

4  5  Crystal  Plate  Glass  Co.  v.  First  Nat.  Bank,  6  Mont.  303,  12  Pac. 
078.  See,  also,  Abbott  v.  Jack,  136  Cal.  510,  69  Pac.  257.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  106;    Cent.  Dig.  §§  253-256. 

4  6  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,  19  L. 
Ed.  lOOS.  Cf.  Pope  v.  Bank  of  Albion,  57  N.  Y.  126.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §   109;    Cent.  Dig.  §§  251-260. 

4T  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,  19  L. 
Ed.  1008 ;  Cooke  v.  State  Nat.  Bank,  52  N.  Y.  96,  11  Am.  Rep.  667. 
Cf.  Mussey  v.  President,  etc.,  of  Eagle  Bank,  9  Mete.   (Ma.ss.)  306. 

If  he  certifies  without  funds,  the  baulc  is  liable  thereon  to  an  in- 
nocent holder  of  the  check.  Farmers'  &  Mechanics'  Bank  v.  Butch- 
ers' &  Duovers'  Rank,  14  N.  Y.  623;  Id.,  16  N.  Y.  125,  69  Am.  Dec. 
678.  Meads  v.  Merchants'  Bank  of  Albany,  25  N.  Y.  143,  82  Am.  Dec. 
331.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  102,  109; 
Cent.  Dig.  §§  2^3,  260. 

TIFF.BKS.&  B.— 21  ■ 


322  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

change;*^  to  indorse  and  transfer  negotiable  paper  in  the 
usual  course  of  business ;  *^  to  conduct  the  business  of  the 
bank  incident  to  collections,  and  for  that  purpose  to  indorse 
negotiable  paper  ;^^  to  rediscount  commercial  paper  ;®^  to 
borrow  money  in  the  usual  course  of  business,^-  and  inciden- 
tally to  execute  notes  for  the  bank,"*^  and  to  pledge  securities 

4  8Fleckner  v.  Bank  of  United  States,  8  Wheat.  338,  360,  5  L.  Ed. 
631 ;  Lafayette  Bank  v.  Bank  of  Illinois,  Fed.  Cas.  No.  7,987,  4  Mc- 
Lean, 208.  See  "Banks  and  Bankiiuj,"  Dec.  Dig.  {Key.  No.)  §§  102. 
109;    Cent.  DU;.  §§  2Jf3,  260. 

4  9  Wild  V.  Bank  of  Passamaquoddy,  Fed.  Cas.  No.  17,646,  3  Mason, 
505;  Farrar  v.  Oilman.  19  Me.  440,  36  Am.  Dec.  766;  City  Bank 
of  New  Haven  v.  Perkins,  29  N.  Y.  .554,  86  Am.  Dec.  332.  He  may 
indorse  in  payment  of  debts.  Fleckner  v.  Bank  of  United  States, 
8  Wheat.  338,  5  L.  Ed.  631 ;  Lamb  v.  Cecil,  25  W.  Va.  288.  But  not 
in  payment  of  a  deposit.  Schneitman  v.  Noble,  75  Iowa,  120,  39  N. 
W.  224.  9  Am.  St.  Rep.  467.  See  "Banks  and  Banking,'"  Dec.  Dig. 
{Key  yo.)  §  109;    Oent.  Dig.  §  260. 

50  Warren  v.  Oilman,  17  Me.  360;  National  Bank  of  the  Metropolis 
V.  Williams,  46  Mo,  17 ;  Elliot  v.  Abbot,  12  N.  H.  549,  37  Am.  Dec. 
227 ;  Corser  v.  Pauf,  41  N.  H.  24,  77  Am.  Dec.  753 ;  Hanson  v.  Heard, 
69  N.  H.  190.  38_Atl.  788;  Bridenbecker  v.  Lowell,  32  Barb.  (N.  Y.) 
9.  Of.  Potter  v.  Merchants'  Bank  of  Albany,  28  N.  Y.  641,  86  Am. 
Dec.  273.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  109; 
Cent.  Dig.  §  260. 

51  Blair  v.  First  Nat.  Bank,  Fed.  Cas.  No.  1.485.  2  Flip.  111.  See, 
also,  Davenport  v.  Stone,  104  Mich.  521.  62  N.  W.  722,  53  Am.  St. 
Rep.  467.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§  lOS, 
109;   Cent.  Dig.  §§  260,  26J,. 

52  City  Nat.  Bank  v.  Chemical  Nat.  Bank,  80  Fed.  859,  26  C.  C.  A. 
195 ;  Cherry  v.  City  Nat.  Bank,  144  Fed.  587,  75  C.  C.  A.  343 ;  Don- 
nell  V.  Lewis  County  Savings  Bank,  SO  Mo.  165 ;  Barnes  v.  Ontario 
Bank,  19  N.  Y.  152;  State  Bank  of  Pike  v.  People's  Nat.  Bank  of 
Fi-anklinville  (Sup.)  118  N.  Y.  Supp.  641.  See,  also,  Coats  v.  Don- 
nell,  94  N.  Y.  168.  Cf.  Western  Nat.  Bank  v.  Armstrong,  152  U.  S. 
346,  14  Sup.  Ct.  572,  38  L.  Ed.  470.  Contra:  First  Nat.  Bank  ol 
Conmna  v.  Michigan  City  Bank,  8  N.  D.  608,  80  N.  W^  766.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  105;    Cent.  Dig.  §  252. 

5  3  Ballston  Spa  Bank  v.  Marine  Bank,  16  Wis.  120.  -See  "Banks 
and  Banking."  Dec.  Dig.  (Key  No.)  §  109;    Cent.  Dig.  §  260. 


§   82)  CASHIER  323 

to  secure  such  loans  made  to  the  bank;  "*  to  receive  payment 
of  loans  made  by  the  bank,  and  to  surrender  notes  and  securi- 
ties upon  payment  ;°^  and  to  extend  the  time  oLpayment  of 
notes. °^ 

It  is  also  a  usual  duty  of  the  cashier  to  make  or  superintend 
the  transfer  of  shares  on  the  books  of  the  bank,^''^  and  his 
act  in  making-^'*  or  in  refusing^®  to  make  a  transfer  is  bind- 
ing on  the  bank. 

Powers  Not  Inlierent 

The  cashier  has  no  authority,  unless  it  is  conferred  upon 
him  by  the  directors,  to  bind  the  bank  by  acts  and  contracts 
which  do  not  relate  to  the  customary  business  of  banking.*^'' 

5  4  Citizens'  Bank  v.  Bank  of  Waddy,  126  Ky.  169,  103  S.  W.  240. 
11  L.  R.  A.  (N.  S.)  598,  128  Am.  St.  Rep.  282.  Cf.  Unioi^  Nat.  Bank 
of  Kansas  City  v.  Lyons.  220  Mo.  538.  119  S.  W.  540.  See  "Banks 
and  Banlcing:'  Dec.  Dig.  {Kei/  No.)  §  109;    Cent.  Dig.  §  260. 

5  5  Matthews  v.  Mass;acbusetts  Nat.  Bank,  Fed.  Cas.  No.  9,286, 
Holmes,  396. 

In  the  absence  of  special  restrictions,  known  to  the  sureties  on 
a  note  payable  to  a  bank,  the  apparght  scope  of  the  authority  of  the 
cashier  includes  an  agreement  by  him  with  the  sureties  to  proceed  to 
make  the  debt,  if  practicable,  out  of  lands,  owned  by  the  maker  and 
pointed  out  to  the  cashier  by  the  sureties.  Security  Savings  Bank 
of  Wellman  v.  Smith.  144  Iowa,  203.  122  N.  W.  826.  See  "Banks  and 
Banking;'  Dec.  Dig.  {Key  No.)  §  108;    Cent.  Dig.  §  2G.',. 

5  6  Wakefield  Bank  v.  Truesdell,  55  Barb.  (N.  Y.)  602.  Cf.  Bank  of 
East  Tennessee  v.  Hooke,  1  Cold.  (Tenn.)  156.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  109;   Cent.  Dig.  §  260. 

5T  Cecil  Nat.  Bank  v.  Watsontown  Bank,  105  U.  S.  217,  26  L.  Ed. 
1039.  See  "Banks  and  Banking,"  Dec.  Dig:  {Key  No.)-^%  40,  10 .'i ; 
Cent.  Dig.  §§  51,  248. 

5  8  Cecil  Nat.  Bank  v.  Watsontown  Bank,  105  U.  S.  217,  26  L.  Ed. 
1039.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  40,  10^; 
Cent.  Dig.  §§  51,  2Ji8. 

59  Case  V.  Citizens'  Bank,  100  U.  S.  446,  25  L.  Kd.  095.  See  "Banks 
and  Banlcing,"  Dec.  Dig.  (Key  No.)  M  -'lO,  10.',;    Cent.  Dig.  §§  51,  2^8. 

6  0  Bank  of  United  States  v.  Dunn,  6  Pet.  51.  8  L:  Ed.  316;  Morse 
V.  Massachusetts  Nat.  Bank,  Fed.  Cas.  No.  9.857,  1  Holmes,  209; 
Sturdevaut  Bros.   &  Co.  v.  Farmers'  &   Merchants'  Bank  of  Rush- 


324  REri:ESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

Thus,  it  has  been  held  that  he  has  not,  by  virtue  of  his 
office,  authority  to  make  a  contract  involving  the  payment  of 
money  not  loaned  by  the  bank  in  the  customary  way;®^  to 
compromise®-  or  to  release®^  a  claim;  to  discharge  a  sure- 
ty; ®*  to  bind  the  bank  by  a  promise  to  one  about  to  indorse 
a  note  for  discount  that  he  shall  not  be  held  liable  upon  the 
indorsement;®^  to  sell  or  transfer  the  personal  property  of 
the  bank,  other  than  negotiable  paper ;  ®®  to  transfer  nonnego- 
tiable  paper;  ®'^    to  pledge  property  for  the  payment  of  an 

ville,  02  Neb.  472,  87  N.  W.  15G;  Id.,  69  Neb.  220,  95  N.  W.  819; 
North  Star  Boot  &  Shoe  Co.  v.  Stebbins,  2  S.  D.  74,  48  N.  W.  83.3. 
See  ''Banks  and  Banking,'"  Dec.  Dig.  {Key  No.)  §§  102,  105;  Cent. 
Dig.  §§  2Jt3,  252. 

61  See  Martin  v.  Webb,  110  U.  S.  7,  3  Sup.  Ct.  428,  28  L.  Ed.  49. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  105;  Gent.  Dig.  § 
252. 

y  6  2  Farmers'  &  Mechanics'  Bank  v.  Clancy,  163  Mich.  586,  128  N. 
W.  752 ;  Bank  of  Commerce  v.  Hart,  37  Neb.  197,  55  N.  W.  631.  20 
L.  R.  A.  780,  40  Am.  St.  Rep.  479.  But  see  Security  Savings  Bank 
of  Wellman  v.  Smith  (Iowa)  119  N.  W.  726.  Cf.  Chemical  Nat.  Bank 
V.  Kohner,  85  N.  Y.  189.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  105;   Cent.  Dig.  §  252. 

6  3  Ecker  v.  First  Nat.  Bank  of  New  Windsor,  59  Md.  291;  Hodge's 
Ex'r  V.  First  Nat.  Bank,  63  Va.  51.  Cf.  Ryan  v.  Dunlap,  17  111.  40, 
63  Am.  Dec.  334.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
105;  Cent.  Dig.  §  252. 

64  Gray  v.  Farmers'  Nat.  Bank,  81  Md.  631,  32  Atl.  518;  Vander- 
ford  V.  Farmers'  &  Mechanics'  Nat.  Bank,  105  Md.  164,  66  Atl.  47, 
10  L.  R.  A.  (N.  S.)  129;  Cochecho  Nat.  Bank  v.  Haskell,  51  N.  H. 
116,  12  Am.  Rep.  67.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  109;   Cent.  Dig.  §  260. 

65  Bank  of  United  States  v.  Dunn,  G  Bet.  51,  S  L.  Ed.  316;  State 
Bank  of  Moore  v.  Forsyth,  41  Mont.  249,  108  Pac.  914,  28  L.  R.  A. 
(N.  S.)  501.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  lOS; 
Cent.  Dig.  §  26^ 

6  6  Asher  V.  Sutton,  31  Kan.  286,  1  Pac.  535;  Greenawalt  v.  Wil- 
son, 52  Kan.  109,  34  Pac.  403;  Holt  v.  Bacon,  25  Miss.  567.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  10^;   Cent.  Dig.  §  2.',S. 

67  Barrick  v.  Austin,  21  Barb.  (N.  Y.)  241.  See  "Banks  and  Bank- 
ing," Dec' Dig.  {Key  No.)  §  100;    Cent.  Dig.  §  2G0.' 


g  82)  CASHIER  325 

antecedent  debt ;  *^  to  sell  or  purchase  or  mortgage  real  es- 
tate;®°  to  lease  real  estate ;"°  to  make  a  contract  with  the 
government  for  the  transfer  of  money/^  ""** 

The  authority  of  the  cashier  does  not  extend  to  transac- 
tions that  are  without  the  corporate  powers.'-  It  is  con- 
fined to  transactions  which  are  for  the  benefit  of  the  bank. 
It  does  not  extend,  for  example,  to  the  making  of  accommoda- 
tion paper. '^^  Nor  does  it  extend  to  a  transaction  which  is  for 
the  benefit  of  the  cashier  personally,  and  one  dealing  with  him 
with  notice  that  such  is  the  character  of  the  transaction  can 
acquire  no  rights  thereby  against  the  bank,  unless  the  trans- 
action was  actually  authorized,  either  expressly  or  by  impli- 
cation.''* 

6s  state  of  Tennessee  v.  Davis,  50  How.  Prac.  CS.  T.)  447.  See 
"Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  i04;    Cent.  Dig.  §  248. 

6  5  Bank  of  Gloster  v.  Hindman.  95  Miss.  742,  .50  South.  65;  Win- 
sor  V.  Lafayette  County  Bank,  18  Mo.  App.  665;  Leggett  v.  New 
Jersey  ilfg.  &  Banking  Co.,  1  N.  J.  Eq.  541,  23  Am.  Dec.  728.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  104;  Cent.  Dig.  §  248. 

'0  Spongberg  v.  First  Nat.  Bank  of  Montpelier,  18  Idaho,  524,  110 
Pae.  716,  31  L.  R.  A.  (N.  S.)  736.  See  "Banks  and  Banking,"  Dec. 
Big.  (Key  No.)  §  104;   Cent.  Dig.  §  2.}.S. 

71  United  States  v.  City  Bank  of  Columbus,  21  How.  356,  16  L.  Ed. 
ISTt.  See  "Banks  and  Banking:'  Dec.  Dig.  (Key  No.)  §  105;  Cent. 
Dig.  §  252. 

-2  Farmers'  &  Merchants'  Nat.  Bank  v.  Smith,  77  Fed.  129,  23 
C.  C.  A.  SO ;  Grow  v.  Cockrill,  63  Ark.  418,  39  S.  W.  60,  36  L.  R.  A. 
89.  Cf.  L'Herbette  v.  Pittsfield  Xat.  Bank,  162  Mass.  137,  38  N.  E. 
368,  44  Am.  St.  Rep.  354.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  102;   Cent.  Dig.  §  243. 

'■s  West  St.  Louis  Savings  Bank  v.  Shawnee  County  Bank,  95  U. 
S.  .557.  24  L.  Ed.  490 :  First  Nat.  Bank  of  Duncan  v.  Anderson.  141 
Fed.  926,  73  C.  C.  A.  160. 

The  bank  is  bound  in  favor  of  a  holder  in  due  course.  Bank  of 
Genesee  v.  Patchin  Bank,  19  N.  T.  312;  Houghton  v.  First  Nat. 
Bank  of  Elkhom,  26  Wis.  66-3,  7  Am.  Rep.  107.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  109;    Cent.  Dig.  §  260. 

-*  Anderson  v.  Kissam  (C.  C.)  35  Fed.  699  (cf.  Kissam  v.  Ander- 
son, 145  U.  S.  43.5,  12  Sup.  Ct.  960.  .36  L.  Ed.  765) :  State  Nat.  Bank 
V.  Newton  Nat.  Bank,  66  Fed.  691,  14  C.  C.  A.  61 :  Lamson  v.  Beard.  94 


32G  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

Signature  to  Negotiable  Instrument 

While,  as  a  rule,  one  who  is  not  named  as  a  party  to  a  negoti- 
able instrument  cannot  maintain  an  action  or  be  charged 
thereon,  by  usage  the  name  of  the  cashier  of  a  bank,  with  his 
title,  "Cashier,"  has  become  established  as  the  alternative  des- 
ignation of  the  bank.  Where  paper  is  so  payable  to  him,  an 
action  may  be  maintained  thereon  by  the  bank,'^  or  by  the 
cashier;  '"  and,  when  indorsed  by  him  in  the  same  form,  the  > 
indorsement  is  the  indorsement  of  the  bank,  which  may  be 
charged  thereon.^'' 

Fed.  31.  36  C.  C.  A.  56,  45  L.  R.  A.  822;  Home  Savings  Baulc  ol' 
Iowa  Falls  v.  Otterbach,  135  Iowa,  157,  112  N.  W.  769,  124  Am.  St. 
Rep.  267 ;  Hier  v.  Miller,  68  Kan.  258,  75  Pac.  77.  63  L.  R.  A.  952 : 
Langlois  v.  Gragnon,  123  La.  453.  49  South.  18,  22  L.  R.  A.  (N.  S.i 
414 ;  Lee  v.  Smith,  84  Mo.  304,  54  Am.  Rep.  101 ;  Mendel  v.  Bo.vd. 
71  Neb.  657,  99  N.  W.  493;  Campbell  v.  Manufacturers"  Nat.  Bank. 
67  N.  J.  Law.  301,  51  Atl.  497,  91  Am.  St.  Rep.  438;  Ellis  v.  First 
Nat.  Bank,  22  R.  I.  565.  48  Atl.  936.  Cf.  Preston  \,  Cutter,  64  N.  H. 
461,  13  Atl.  874. 

The  cashier  has  no  authority,  by  virtue  of  his  otfice,  to  certify 
his  own  check,  or  to  issue  cashier's  drafts  to  his  own  order  in  pay- 
ment of  his  debts.  Gale  v.  Chase  Nat.  Bank.  104  Fed.  214.  43  C.  C. 
A.  496.  See  ''Banks  and  Banking,"  Dec.  Dirj.  {Key.  Xo.)  §§  105,  111 : 
Cent.  Dip.  §§  252,  2SS. 

7  5  Baldwin  v.  Bank  of  Newbury.  1  Wall.  2.34.  17  L.  Ed.  .534;  Darby 
V.  Berney  Nat.  Bank.  97  Ala.  643,  11  South.  881;  Hobbs  v.  Chemi- 
cal Nat.  Bank.  97  Ga.  524,  25  S.  E.  348;  Nave  v.  First  Nat.  Bank 
of  Lebanon,  87  Ind.  204;  President,  etc.,  of  Commercial  Bank  v. 
French,  21  Pick.  (Mass.)  486,  32  Am.  Dec.  280;  First  Nat.  Bank  of 
Angelica  v.  Hall,  44  N.  Y.  395,  4  Am.  Rep.  698.  See  "Bills  and  Notes." 
Dec.  Dig.  (Key  No.)  §  123;    Cent.  Dig.  §§  260-2G7. 

7  6  McHenry  v.  Ridgley,  2  Scam.  (111.)  309.  35  Am.  Dec.  110;  Fair- 
field v.  Adams,  16  Pick.  (Mass.)  381.  See  '-BiUs  and  Notes,"  Dec. 
Dig.  (Key  No.)  §  123;    Cent.  Dig.  §§  260-267. 

7  7  Collins  V.  Johnson,  16  Ga.  4.58;  Bank  of  State  v.  Wheeler,  21 
Ind.  90 ;  Bank  of  Genesee  v.  Patchin  Bank,  13  N.  Y.  309 ;  Bank  of 
New  York  v.  State  Bank  of  Ohio,  29  N.  Y.  619 ;  Houghton  v.  First 
Nat.  Bank  of  Elkhorn,  26  Wis.  663.  7  Am.  Rep.  107. 

"Where  an  instrument  is  drawn  or  indorsed  payable  to  a  person 
as  'cashier"     *     *     *     of  a  bank,  it  is  deemed  to  be  prima  facie  pay- 


83)  TELLERS    AND   SUBOUDIN'ATE    OFFICERS  327 


TELLERS  AND  SUBORDINATE  OFFICERS 

83.  The  tellers  and  .other  subordinate  officers  are  under  the 
direction  of  the  cashier.  A  receiving  teller  has  au- 
thority to  receive  deposits,  and  a  paying  teller  to 
to  pay  and  usually  to  certify  checks. 

The  tellers  and  other  subordinate  officers  of  the  bank  are 
under  the  direction  of  the  cashier,  and  "are,  as  it  were,  the 
arms  by  which  designated  portions  of  various  functions  are 
discharged."  ^^  Usually  there  is  a  paying  teller  and  a  receiving 
teller,  who  are  charged  with  the  respective  duties  of  paying 
chec|cs  presented  for  payment  and  of  receiving  deposits,  al- 
though the  two  functions  may  be  united  in  a  single  teller.'® 
The  receiving  teller  is,  of  course,  a  proper  officer  to  receive 
a  deposit,  and  it  has  been  held  that,  if  a  deposit  is  made  with 
the  paying  teller  he  becomes  the  depositor's  agent ;  the  trans- 
action being  outside  the  ordinary  scope  of  his  employment.**^ 

able  to  the  bank  *  *  *  of  which  he  is  such  officer,  and  may  be 
negotiated  by  either  the  indorsement  of  the  banli  *  *  *  or  the 
indorsement  of  the  officer."  Negotiable  Instruments  Law,  §  42. 
See  ''BUls  and  ls!otes"  Dec.  Dig.  {Key  No.)  §§  1S3,   197;    Cent.  Dicj. 

§§  m,  m. 

7  8  Merchant's  Nat.  Bank  v.  State  Nat.  Bank,  10  Wall.  604,-19  L. 
Ed.  1008. 

Where  the  cashier  had  entire  control  of  the  bank,  and  gave  the 
teller  authority  to  receive  special  deposits,  the  teller's  act  in  receiving 
such  a  deposit  bound  the  bank.  Pattison  v.  Syrticuse  Nat.  Bank, 
SO  N.  Y.  82,  3G  Am.  Rep.  582. 

As  to  functions  of  a  note  teller,  see  Marine  Bank  v.  Ferry's 
Adm'rs,  40  111.  255.  See  Banks  and  Banking,"  Dec.  Dig.  (Key  No.) 
§§  102,  106,  109;    Cent.  Dig.  §§  239,  256,  257. 

79  A  receiving  and  paying  teller  had  apparent  authority  to  receive 
a  note  for  collection.  City  Nat.  Bank  of  Ft.  Worth  v.  Martin,  70 
Tex.  643,  S  S.  W.  .507,  8  Am.  St.  Rep.  632.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  112;    Cent.  Dig.  §  272. 

80  Thatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  (N.  Y.)  121. 
-S'ce  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  106,  121;  Cent. 
Dig.  §  2.98. 


328  REPRESENTATION   OF    BANK  BY   OFFICERS  (Ch.  10 

But  a  deposit  with  the  paying  teller,  found  behind  the  counter 
employed  in  the  bank's  business,  at  his  request,  it  appearing 
that  in  the  absence  of  the  receiving  teller  other  officers  acted 
in  his  place,  has  been  held  to  bind  the  bank.^^  It  is  usually 
within  the  authority  of  the  paying  teller  to  certify  checks. ^^ 


ADMISSIONS  AND  REPRESENTATIONS 

84.  In  accordance  with  the  general  rule  of  agency,  a  state- 
ment made  by  the  cashier  or  other  officer  of  a  bank, 
in  and  as  a  part  of  an  authorized  transaction  for  the 
bank,  is  binding  upon  it,  and  may  be  the  basis  of 
an  estoppel,  or  a  ground  for  rescission,  or  for  the 
recovery  of  damages  in  an  action  of  deceit. 

In  General 

It  is  a  general  rule,  applicable  to  corporations  as  well  as 
to'  individuals,  that  the  statement  of  an  agent  is  evidence 
against  his  principal,  when  it  is  made  with  his  authority,  or 
when  it  is  made  by  the  agent  in  the  transaction  for  his  prin- 
cipal of  some  authorized  business,  to  which  it  had  reference 
and  with  which  it  was  connected,  so  as  to  be  part  of  that 
transaction.^^  This  rule  applies,  of  course,  to  statements  made 
by  the  officers  and  agents  of  banks.  A  statement  made  by  the 
cashier  or  other  officer,  in  and  as  a  part  of  an  authorized  trans- 
action for  the  bank,  is  binding  upon  it,  and,  if  false,  may  be 
the  basis  of  an  estoppel,  or  a  ground  for  rescinding  the  trans- 
action, or  for  the  recovery  of  damages  in  an  action  for  deceit, 

81  East  River  Nat.  Bank  v,  Gove,  57  N.  Y.  597.  See,  also,  Seconrl 
Nat.  Bank  v.  Averell,  2  App.  D.  C.  470,  25  L.  R.  A.  761.  See  "Banks 
and  BanJcing,"  Dec.  Dig.  (Key  No.)  §§  lOG,  121;    Cent.  Dig.  §  298. 

8  2  Farmers'  &  Mechanics'  Bank  v.  Butctiers'  &  Drovers'  Bank,  IG 
N.  Y.  125,  69  Am.  Dec.  678;  ante,  p.  141  See  "Banks  and  Banking;' 
Dec.  Dig.  (Key  Wo.)  §  106;   Cent.  Dig.  §  256. 

8  3  Tiffany,  Agency,  247. 


§    84)  ADMISSIONS    AXD    REPRESENTATIONS  329 

according  to  the  circumstances  of  the  particular  transaction.'* 
Thus,  if  the  cashier  states  to  a  surety  on  a  note  that  it  is 
paid,  whereb}^  the  surety  is  induced  to  surrender  Jo^the  bank 
property  of  the  principal  debtor,  the  bank  is  estopped  to  deny 
the  truth  of  the  statement.*''  If  an  officer  has  authority  to 
procure  a  discount  of  paper  held  by  the  bank,  and  induces 
another  bank  to  discount  the  paper  by  fraudulent  representa- 
tions concerning  it,  the  bank  which  makes  the  discount  may 
rescind  the  transaction,  or  may  maintain  an  action  for  damages 
caused  by  the  deceit.*'' 

On  the  other  hand,  a  bank  is  not  bound  by  a  statement  of 
its  officer,  if  he  is  not  authorized  to  make  it,  or  it  is  not  part 
of  an  authorized  transaction."  The  declaration  of  a  di- 
rector, when  he  is  not  specially  authorized  in  the  matter,  is 

84  Binghampton  Trust  Co.  v.  Auten,  68  Ark.  299,  57  S.  W.  1105, 
82  Am.  St.  Rep.  295 ;  Carr  v.  National  Bank  &  Loan  Co.  of  Water- 
town,  167  N.  Y.  375,  60  N.  E.  649,  82  Am.  St.  Rep.  725. 

Where  a  bank  discounted  a  certified  check  on  the  strength  of  a 
statement  of  the  teller  of  the  certifying  bank  that  the  certification 
was  good,  and  the  teller  failed  to  state  that  payment  had  been  stop- 
ped, the  drawee  bank,  by  failure  to  state  that  fact,  was  estopped  to 
deny  its  liability.  Clews  v.  Bank  of  New  York  Nat.  Banking  Ass'n, 
89  N.  Y.  418,  42  Am.  Rep.  303.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  111;   Cent.  Dig.  §§  269,  210. 

8  5  Franklin  Bank  v.  Steward,  37  Me.  519;  Cochecho  Nat.  Bank 
V.  Haskell,  51  N.  H.  116,  12  Am.  Rep.  67.  See  "Banks  and  Bank- 
ing,"  Dec.  Dig.  {Key  No.)  §  111;    Cent.  Dig.  §§  260,  270. 

8  6  Binghampton  Trust  Co.  v.  Auteu,  68  Ark.  290,  57  S.  W.  1105.  82 
Am.  St.  Rep.  295.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  A'o.)  § 
UK-    Cent.  Dig.  §§  269,  270. 

8  7  Henry  v.  Northern  Bank  of  Alabama,  63  Ala.  527;  Merchants' 
Bank  v.  Marine  Bank,  3  Gill  (Md.)  96,  43  Am.  Dec.  300;  Union 
Banking  Co.  of  Baltimore  City  v.  Gittiugs,  45  Md.  181;  Wyman  v. 
President,  etc.,  of  Hallowell  &  Augusta  Bank,  14  Mass.  58,  7  Am. 
Dec.  194;  President,  etc.,  of  Salem  Bank  v.  President,  etc.,  of  Glou- 
cester Bank,  17  Mass.  21,  9  Am.  Dec.  Ill;  Mapes  v.  Second  Nat. 
Bank  of  Titusville,  SO  Pa.  163 ;  Hazelton  v.  Union  Bank  of  Columbus 
32  Wis.  34. 

A  statement  of  a  teller  that  an  indorsement  was  good  held  not 


330        REPRESENTATION  OF  BANK  BY  OFFICERS     (Ch.  10 

not  binding.^ «  A  cashier  does  not  act  as  the  agent  of  the  bank- 
in  answering  an  inquiry  addressed  to  him  by  a  person  as  to 
the  business  standing  of  a  thii'd  person ;  his  act  being  a  mere 
vokmtary  statement,  and  not  relating  to  the  business  of  the 
bank/^  Nor  does  he  bind  the  bank  by  answering  an  inquiry 
by  one  about  to  become  a  surety  on  the  bond  of  a  fellow  em- 
ploye as  to  the  condition  of  his  account,  or  as  to  other  matters 
in  respect  to  which  it  is  not  a  part  of  his  duty  to  make  state- 
ments.""  The  bank  is  not  chargeable  with  representations  made 
by  an  officer,  where  he  is  acting  in  his  own  interest  and  ad- 
versely to  that  of  the  bank.**^ 

to  bind  the  bank.     Walker  v.  St.  Louis  Nat.  Bank,  5  Mo.  App.  214. 

Bee  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  111;    Cent.  Dig.  §§ 

269,  210. 

ssEast  River  Bank  v.  Hoyt,  41  Barb.   (N.  Y.)  441;    post,  p.  341. 

8ee  '-Banks  and  Banking^  Dec.  Dig.  {Key  No.)  §  111;   Cent.  Dig.  §§ 

269,  210. 

89  First  Nat.  Bank  v.  Marshall  &  Ilsley  Bank,  83  Fed.  725,  28  C. 

C.  A.  42 ;   Taylor  v.  Commercial  Bank.  174  N.  Y.  181,  66  N.  E.  726, 

62  L.  R.  A.  783,  95  Am.  St.  Rep.  564.     See  "Banks  and  Banking," 

Dec.  Dig.  {Key  No.)  §  111;    Cent.  Dig.  §§  269,  210. 

00  United  States  Fidelity  &  Guaranty  Co.  v.  Muir,  115  Fed.  264, 

53  C.  C.  A.  56 ;    Liebermau  v.  First  Nat.  Bank  of  Wilmington,  8  Del. 

Ch.  229,  40  Atl.  382.     See,  also,  Ida  County  Savings  Bank  v.  Seiden- 

stieker  (Iowa)  92  N.  W.  862. 

A  president  of  a   national  bank  has  no  power,  in  the  ordinary 

course  of  business,  to  certify  to  the  fidelity  or  integrity  of  the 
cashier  for  the  purpose  of  enabling  him  to  procure  a  bond  insuring 
his  fidelity ;  and  hence  the  bank  cannot  be  deemed,  merely  by  virtue 
of  the  president's  relation  to  it,  to  have  any  knowledge  of  the  giv- 
ing by  him  of  such  certificate.  American  Surety  Co.  v.  Pauly,*170 
U.  S.  133,  18  Sup.  Ct.  552,  42  L.  Ed.  977.  Cf.  Guarantee  Co.  of 
North  America  v.  Mechanics'  Savings  Bank  &  Trust  Co.,  183  U.  S. 
402,  22  Sup.  Ct.  124,  46  L.  Ed.  253;  Willoughby  v.  Fidelity  &  De- 
posit Co.  of  Maryland,  16  Okl.  546,  85  Pac.  713,  7  L.  R.  A.  (N.  S.) 
548,  affirmed  Cherry  v.  Fidelity  &  Deposit  Co.,  205  U.  S.  537,  27 
Sup.  Ct.  790,  51  L.  Ed.  920;  Warren  Deposit  Bank  v.  Fidelity  & 
Deposit  Co.  of  Maryland,  116  Ky.  38,  75  S.  W.  llli:  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  111;  Cent.  Dig.  §§  269,  270. 
81  Moores  v.  Citizens'  Nat.   Bank,  111  U.   S.  156.  4  Sup.  Ct.  345, 


§    84)  ADMISSIONS    AND    UKl'liHSENTATIONS  331 

Torts  and  Ji'roiii!;fi(l  Acts 

A  private  corporation  is  generally  liable  for  the  torts  of 
its  servants  and  agents,  committed  in  the  course  at-their  em- 
ployment, to  the  same  extent  as  a  natural  person  would  be.**^ 
The  questions  which  are  material  here  relate  principally  to  the 
torts  arising-  from  fraud.  In  general,  it  may  be  said  that  a 
bank  is  liable  for  fraud  of  its  agent,  committed  by  a  false 
representation  for  its  benefit,  when  the  representation  is  made 
'  as  an  inducement  to  a  third  person  in  a  transaction  which  is 
within  the  scope  of  the  agent's  actual  or  of  his  apparent  au- 
thority, unless  the  person  dealing  with  the  agent  and  injured 
by  the  fraud  has  notice  that  the  transaction  or  the  representa- 
tion is  unauthorized."^  Thus,  where  a  bank,  in  order  to  in- 
crease deposits  or  to  sell  its  collateral,  through  its  board  of 
directors  makes  or  causes  to  be  made  false  statements  con- 
cerning the  financial  condition  of  its  customers,  to  a  third 
person,  for  the  purpose  of  misleading  him,  it  is  liable  for 
deceit  if  loss  results. °*  And  where  the  cashier,  in  the  course 
of  an  authorized  transaction,  makes  a  false  stafement  of  the 
same  character  and  to  the  same  end,  the  bank  is  liable  in  tort 
to  one  injured  thereby,  although  the  cashier  was  not  expressly 

28  L.  Ed.  3S5 ;  State  Savingrs  Bank  of  Ionia  v.  Montgomery,  126 
Mich.  .",27,  85  N.  W.  879;  post,  p.  389.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  111;    Cent.  Dig.  §§  269,  270. 

82  Clark,  Corp.  (2cl  Ed.)  193,  510. 

83  Ante,  p.  311;  Barwick  v.  English  Johit  Stock  Bank,  L.  R.  2 
Ex.  259.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  112; 
Cent.  Dig.  §§  2T1,  272. 

9  4  Hindman  v.  First  Nat.  Bank,  98  Fed.  5G2,  39  C.  C.  A.  1,  48 
h.  R.  A.  210. 

The  directors  of  the  F.  National  Bank  made  four  reports  to  the 
comptroller  of  the  currency,  under  the  provisions  of  the  Nationai 
Banking  Law,  all  of  which  were  false.  The  ofhcers  and  directors 
published  and  distributed  to  the  stockholders  of  the  bank  a  state- 
■  ment  representing  that  the  hank  was  in  a  very  flourishing  condi- 
tion, whereas  in  fact  it  was  insolvent,  and  was  known  to  the 
officers  and  directors  to  be  so.  The  M.  Bank,  believing  these  rep- 
resentations to  be  true,   discounted  a  note  for  one  J.,  solely  upon 


332  REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

authorized  by  the  board  of  directors  to  make  such  statement.®-'' 
So,  a  bank  may  be  held  for  conspiracy  with  others  resulting 
in  injury  to  a  third  person.''  While  a  bank  is  under  no  duty 
to  safeguard  and  supervise  a  trust  account,  or  to  look  after 
the  appropriation  of  the  funds  when  withdrawn, "^^  if  the  di- 
rectors, by  failing  in  their  duty  to  supervise  and  control,  per- 
mit the  cashier  to  have  complete  control  over  the  business, 
so  that  he  is  able  for  a  long  time  to  commit  irregularities  and 
misappropriate  such  funds  deposited  in  his  own  name  per- 
sonally as  trustee,  the  bank  may  be  held  liable  for  the  funds 
misappropriated;  the  neglect  of  directors  being  responsible 
for  the  cashier's  opportunity  to  misappropriate  them.®* 

the  security  of  certaiu  shares  of  stock  of  the  F.  Bank,  which  ulti- 
mately turned  out  to  be  worthless.  There  was  no  counection  or 
communication  between  the  F.  Bank  and  the  M.  Bank  or  J.  Held, 
that  the  F.  Bank  could  not  be  held  liable  to  the  M.  Bank  for  de- 
ceit, since  there  was  no  privity  between  them,  and  it  was  not  in 
the  power  of  the  officers  to  bind  the  bank  by  representations  to 
a  mere  stranger  to  induce  him  to  enter  into  a  transaction  in  which 
the  bank  was  not  at  all  interested.  Merchants'  Nat.  Bank  v.  Arm- 
strong (C.  C.)  65  Fed.  9.32.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  112;    Cent.  Dig.  §§  271,  272. 

95  Hindman  v.  First  Nat.  Bank,  112  Fed.  9.31,  50  C.  C.  A.  623, 
57  L.  R.  A.  108.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
112;   Cent.  Dig.  §§  271,  272. 

9  6  Stewart  v.  Wright,  147  Fed.  321,  77  C.  C.  A.  499;  Hobbs  v. 
Boatright,  195  Mo.  693,  93  S.  W.  934,  5  L.  R.  A.  (N.  S.)  906,  113 
Am.  St.  Rep.  709;  Johnston  Fife  Hat  Co.  v.  National  Bank  of 
Guthrie,  4  Okl.  17,  44  Pac.  192.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  112;   Cent.  Dig.  §§  271,  272. 

97  Ante.  p.  45. 

98  Lowndes  v.  City  Nat.  Bank  of  South  Norwalk,  82  Conn.  8,  72 
Atl.  150,  22  L.  R.  A.  (N.  S.)  40S.  See,  also,  National  Bank  of  Osh- 
kosh  V.  Munger,  95  Fed.  95.  36  C.  C.  A.  659.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  112;    Cent.  Dig.  §§  271,  272. 


§§  85-86)  NOTICE  333 

NOTICE 

85.  IN  GENERAL — In  accordance  with  the  gfffieral  rule 

of  agency,  when,  in  the  course  of  his  employment, 
an  officer  or  other  agent  of  a  bank  acquires  knowl- 
edge or  receives  notice  of  any  fact  material  to  the 
business  in  which  he  is  employed,  the  bank  is 
deemed,  as  a  rule,  to  have  notice  of  such  fact;  and 
in  most  jurisdictions  knowledge  of  a  fact  material 
to  the  business  in  which  the  agent  is  employed,  if 
actually  present  in  his  mind  during  the  agency  and 
while  acting  in  the  bank's  behalf,  although  acquir- 
ed by  him  outside  of  his  agency,  is  deemed,  as  a 
rule,  notice  to  the  bank. 

86.  DISCLOSURE  AGAINST  INTEREST— The  knowl- 

edge of  the  agent  will  not  be  imputed  to  the  bank, 
when  the  agent  is  engaged  in  committing  an  inde- 
pendent fraudulent  act  upon  his  own  account,  and 
the  knowledge  sought  to  be  imputed  is  of  facts 
which  relate  to  that  act,  and  which,  if  commu- 
nicated, would  prevent  the  consummation  of  the 
fraud,  or  when  the  agent  is  openly  acting  on  his 
own  behalf,  or  on  behalf  of  another  in  a  transaction 
with  the  bank;  but  when,  in  any  transaction,  the 
agent  does  an  act  as  the  sole  representative  of  the 
bank,  and  is  not  acting  openly  on  behalf  of  him- 
self or  another,  although  his  conduct  may  be  fraud- 
ulent, it  is  generally  held  that  the  bank  may  not 
avail  itself  of  the  act,  in  order  to  retain  an  advan- 
tage or  to  assert  a  claim  founded  thereon,  without 
being  charged  with  his  knowledge. 

Notice — In  General 

It  is  a  general  rule  of  agency,  which  is,  of  course,  applicable 
to  the  officers  and  agents  of  banks,   incorporated  and  unin- 


334  ,     REPRESENTATION   OF    BANK   BY   OFFICERS  (Ch.  10 

corporated,  that  when,  in  the  course  of  his  employment,  the 
agent  receives  notice  or  acquires  knowledge  of  any  fact  ma- 
terial to  the  business  in  which  he  is  employed,  the  principal 
is  deemed  to  have  notice  of  that  fact.^**  Xot  only  is  a  notice 
communicated  to  any  officer  authorized  to  receive  it  notice  to 
the  bank/""  but  the  bank  is  charged  with  knowledge  of  any 
fact  material  to  its  business  acquired  by  any  officer  while 
transacting  such  business. ^"^ 

To  afifect  the  bank  with  notice,  the  matter  known  to  the 
agent  must  be  something  within  the  scope  of  his  agency ;  that 
is,  a  matter  which  it  is  his  duty,  in  the  capacity  in  which  he 
is  employed,  to  commitnicate  to  the  bank,  or  in  reference  to 
which  he  has  authority  to  act.^^-  Knowledge  acquired  by  the 
officer  outside  of  his  agency  will  not  be  imputed  to  the  bank. 
But.  although  knowledge  so  acquired  is  not  notice  to  the  bank, 

0  0  Tiffany,  Ag.  257. 

100  Canadian  Bank  of  Commerce  v.  Coumbe.  47  Midi.  358.  11  N. 
W.  196:  Second  Nat.  Bank  of  St.  Paul  v.  Howe.  40  Minn.  390,  42 
X.  W.  200,  12  Am.  St.  Rep.  744. 

A  bank  is  charged  witli  notice  of  letters  duly  mailed  to  it  and 
received  by  the  general  bookkeeper,  whose  duty  it  is  to  open  and 
distribute  mail,  though  he  conceals  such  letters  to  hide  irregularities 
in  his  office,  and  thereby  prevents  their  coming  into  the  hands  of  the 
other  bank  officers.  First  Nat.  Bank  v.  Fourth  Nat.  .Bank,  56 
Fed.  967,  6  C.  C.  A.  183.  Sec  "Banlcs  and  Banl-iiw;'  Dec.  Dig.  {Key 
A'o.)  §  116;   Cent.  Dip.  §§  28.2-287. 

101  Harris  v.  American  Building  &  Loan  Ass'n,  122  Ala.  545.  25 
South.  200;  Hager  v.  National  German-American  Bank,  105  Ga. 
116.  31  S.  E.  141 ;  Baldwin  v.  Davis.  118  Iowa,  36,  91  N.  W.  778 ; 
Orme  v.  Baker,  74  Ohio  St.  337.  78  N.  E.  439.  113  Am.  St.  Rep. 
968;  Stebbins  v.  Lardner,  2  S.  D.  127,  48  N.  W.  847.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  116;    Cent.  Dig.   §§  282-287. 

102  Curtice  v.  Crawford  County  Bank  (C.  C.)  110  Fed.  830;  Mc- 
Calmont  v.  Lanning,  1.54  Fed.  353.  84  C.  C.  A.  1.38;  Morris  v.  First 
Nat.  Bank  of  Samson,  162  Ala.  301,  .50  South.  137;  Marsh,  Merwin 
&  Lemon  v.  Wheeler,  77  Conn.  440.  .59  Atl.  410.  107  Am.  St.  Rep. 
40;  Organized  Charities  Ass'n  v.  Mansfield,  82  Conn.  504.  74  Atl. 
781,    135   Am.    St.    Rep.    285;    Washington    Nat.    Bank    v.    Pierce,    6 


§§  85-86)  NOTICE  335 

it  is  generally  held  that  such  knowledi^e  of  the  aj^ent,  if  after- 
wards actually  present  in  his  mind  during  his  agency,  while 
he  is  acting  for  the  bank  in  a  transaction  to  which Jhe  knowl- 
edge is  material,  will  be  imputed  to  the  bank.^"'^  It  must  be 
established  by  the  person  asserting  notice  that  the  knowledge 
was  thus  present  in  the  agent's  mind  ;  but  the  burden  would 
be  sustained  in  any  case  if  the  knowledge  had  been  acquired 
so  recently  as  to  make  it  incredible  that  he  should  have  for- 
gotten it."*  Where  the  agency  is  continuous,  as  in  the  case 
of  the  cashier  or  other  officer  of  a  bank,  knowledge  acquired 
or  notice  received  by  him  as  agent,  being  necessarily  imputed 
to  his  principal,  will,  of  course,  bind  the  bank  in  any  subse- 
quent transaction  by  him  as  agent,  without  proof  that  he  re- 
Wash.  491.  33  Pac.  972,  3G  Am.  St.  Rep.  174.  See.  also,  First  Nat. 
Bank  of  West  Minneapolis  v.  Persall,  110  Minn.  333,  125  N.  W.  50(5. 
13G  Am.   St.  Rep.  499. 

That  the  president  or  cashier  of  a  bank  which  purchased  munici- 
pal bonds  had  notice  or  knowledge  of  facts  which  would  have  re- 
quired inquiry  as  to  what  the  bonds  were  given  for,  had  he  made 
the  purchase,  is  not  notice  to  the  bank,  where  the  purchase  was 
not  made  by  him,  but  by  the  other,  having  no  such  notice  or  knowl- 
edge.   Thompson  v.  Village  of  Mecosta,  141  Mich.  175,  104  N.  W.  694. 

A  bank  was  not  affected  by  information  given  to  its  messenger 
by  a  member  of  a  former  partnership,  to  which  a  draft  on  which 
the  partnership  was  liable  and  which  had  been  renewed  was  pre- 
sented, to  the  effect  that  the  partnership  was  dissolved  and  the 
other  partner  liable  for  its  debts;  the  information  not  being  com- 
municated to  the  bank,  and  the  messenger's  agency  being  confined 
to  mere  collections.  Camp  v.  Southern  Banking  &  Trust  Co.,  97 
Ga.  5S2,  25  S.  E.  362.  See  ''Banks  and  Banl;in<j,"  Dec.  Dbj.  {Keij 
No.)  §  116;    Cent.  Dig.  §§  2S2-281. 

103  Campbell  v.  First  Nat.  Bank,  22  Colo.  177,  43  Pac.  1007;  Fair- 
field Savings  Bank  v.  Chase,  72  Me.  220,  39  Am.  Bep.  319;  Union 
Bank  v.  Campbell,  4  Humph.  (Tenn.)  398.  See  "Banks  and  Bank- 
ing;' Dec.  Dig.  {Key  No.)  §  116;    Cent.  Dig.  §§  282-287. 

104  Distilled  Spirits,  11  Wall.  356,  20  L.  Ed.  167;  Brothers  v. 
Bank  of  Kaukauna,  M  Wis.  381,  54  N.  W.  786,  36  Am.  St.  Rep. 
932.  See'  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  116 j  Cent. 
Dig.  §§  282-287. 


336  REPRESENTATION    OF    BANK   BY   OFFICERS  (Ch.  10 

tained  in  his  memory, ^"^   and  will   bind  the  bank,   even  in 
transactions  conducted  by  other  agents. ^°" 

The  cashier  being  the  officer  of  the  bank  by  whom  its 
financial  transactions  are  conducted,  the  bank  is  generally 
bound  by  his  knowledge.  Thus,  if  the  cashier,  or  any  other 
officer  authorized  to  act,  accepts  collaterals  with  knowledge 
that  the  debtor  holds  them  in  trust,  or  for  any  other  reason  is 
not  authorized  to  pledge  them,  the  bank  is  charged  with  such 
knowledge. ^^'^  So,  if  he  accepts  a  mortgage  with  knowledge 
of  a  prior  mortgage;  ^"^  or  discounts  a  note  with  notice  of 
defenses;^"®  or  receives  a  payment  from  an  individual  with 
knowledge  that  the  money  belongs  to  a  trust  estate ;  ^^^  or 
receives  a  deposit   with  knowledge  that  the  bank   is   insol- 

105  Curtice  v.  Crawford  County  Bank,  118  Fed.  390,  56  C.  C.  A. 
174 ;  Holden  v.  New  York  &  E.  Bank,  72  N.  T.  2S0 ;  Foote  v.  Utah 
Commercial  &  Savings  Bank,  17  Utah,  283,  54  Pac.  104.  See  "Banks 
and  Banking;'  Dec.  Dig.  {Key  'No.)   §  116;    Cent.  Dig.  §§  282-281. 

106  Mechanics'  Bank  v.  Seton,  1  Pet.  299,  7  L.  Ed.  152;  Birming- 
ham Trust  &.  Savings  Co.  v.  Louisiana  Nat.  Bank,  99  Ala.  379,  13 
South.  112,  20  L.  R.  A.  600;  United  States  Nat.  Bank  v.  Forstedt, 
64  Neb.  855,  90  N.  W.  919.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  116;    Cent.  Dig.  §§  282-281. 

lor  Zeis  v.  Potter,  105  Fed.  671,  44  C.  C.  A.  665;  Loring  v.  Brodie, 
134  Mass.  453 ;  Trenton  Banking  Co.  v.  Woodruff,  2  N.  J.  Eq.  117 ; 
Gaston  v.  American  Exch.  Nat.  Bank,  29  N.  J.  Eq.  98;  Groff  v. 
Stitzer,  75  N.  J.  Eq.  452,  72  Atl.  970.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  116;   Cent.  Dig.  §§  282-287. 

108  Ottaquechee  Savings  Bank  v.  Holt,  58  Vt.  166,  1  Atl.  485. 
See,  also,  Christie  v.  Sherwood,  113  Cal.  526,  45  Pac.  820.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  116;  Cent.  Dig.  §§ 
282-287. 

109  Citizens'  Savings  Bank  v.  Walden  (Ky.)  52  S.  W.  953;  Fall 
River  Union  Bank  v.  Sturtevant,  12  Cush.  (Mass.)  372 ;  Ft.  Dearborn- 
Nat.  Bank  v.  Seymour,  71  Minn.  81,  73  N.  W.  724;  Merchants*  & 
Planters'  Bank  v.  Penland,  101  Tenn.  445,  47  S.  W,  693.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  116;    Cent.  Dig.   §§  282-2S7. 

110  Loring  v.  Brodie,  134  Mass.  453 ;  First  Nat.  Bank  of  Bethlehem 
V.  Peisert,  2  Penny.  (Pa.)  277.  See  "Banks  and  Banking"  Dec. 
Dig.  {Key  No.)  §  116;    Cent.  Dig.  §§  282-287. 


§§  85-86)  NOTICE  337 

vent;^^^    or  pays  money  to  one  person  with  notice  that  it 
belongs  to  another." - 

Since  the  directors  have  power  to  bind  the  bank  only  when 
acting  as  a  board,  knowledge  acquired  by  a  director  individu- 
ally, and  not  while  acting  in  his  official  capacity  as  a  member 
of  the  board,  will  not  be  imputed  to  the  bank.^^^  Notice  com- 
municated to  the  board,  of  course,  binds  the  bank,  and  it  seems 
that  notice  communicated  to  a  director  for  the  purpose  of 
being  communicated  to  the  directors  is  likewise  binding."* 
If,  while  acting  as  a  member  of  the  board,  a  director  has  ac- 
tual knowledge  of  some  fact  material  to  the  business  in  hand, 
although  he  acquired  the  knowledge  unofficially,  the  bank  will 

iiiCragie  v.  Hadley,  99  N.  Y.  131,  1  N.  E.  537,  52  Am.  Rep.  9. 
-See  "Banks  and  Banking,"  Dec.  Dig,  (Key  No.)  §  116;  Cent.  Dig. 
§§  282-287. 

ii2McCann  v.  State,  4  Neb.  324.  See  "Batiks  and  Banking,"  Dec. 
Dig.  (Key  Xo.)  %  116;    Cent.  Dig.  §§  282-287. 

113  Fidelity  &  Deposit  Co.  v.  Courtney,  186  U.  S.  342,  22  Sup.  Ct. 
833,  46  L.  Ed.  1193;  Farmers'  &  Citizens'  Bank  v.  Payne,  25  Conn. 
444.  68  Am.  Dec.  362;  First  Nat.- Bank  of  Higlistown  v.  Cliristopher, 
40  N.  J.  Law,  435,  29  Am.  Rep.  262;  Bank  of  United  States  v. 
Davis,  2  Hill  (N.  T.)  452;  Westfield  Bank  v.  Cornen,  37  N.  T.  320, 
93  Am.  Dec.  573;  Atlantic  State  Bank  of  City  of  Brooklyn  v. 
Savery,  82  N.  T.  291;  Memphis  Nat.  Bank  v..  Sneed,  97  Tenn.  120, 
36  S.   W.   716,  34  L.  R.  A.  274,  56  Am.   St.  Rep.  788. 

That  a  hank  director  is  also  director  in  a  corporation  whose  note 
the  bank  discounts  is  not  notice  to  it  of  equities  between  the  par- 
ties. Casco  Nat.  Bank  of  Portland  v.  Clark,  139  N.  Y.  307,  34 
N.  E.  908,  36  Am.  St.  Rep.  705. 

A  bank  is  not  charged  with  knowledge  of  the  character  of 
negotiable  paper  by  the  mere  fact  that  it  discounts  it  on  the  recom- 
mendation of  a  director,  if  the  latter  does  not  control  its  discre- 
tion or  discount  the  paper  himself  as  an  officer  or  agent  of  the 
bank.  Shaw  v.  Clark,  49  Mich.  384,  13  N.  W.  786,  43  Am.  Rep. 
474.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  116;  Cent. 
Dig.   §§   282-287. 

ununited  States  Ins.  Co.  v.  Shriver,  3  Md.  Ch.  381;  National 
Bank  v.  Norton,  1  Hill  (N.  Y.)  572  (senible) ;    Union  Bank  v.  Camp- 

Tiff.Bks.&  B.— 22 


.'^38        REPRESENTATION  OF  BANK  BY  OFFICERS     (Ch.  10 

be  affected  by  his  knowledge,  subject  to  the  exceptions  referred 
to  in  the  following  paragraph.^ ^^ 

Disclosure  Against  Interest 

It  is  commonly  said  that  the  rule  that  a  principal  is  bound 
by  the  knowledge  of  his  agent  is  based  on  the  principle  that 
it  is  the  agent's  duty  to  communicate  the  knowledge  which  he 
has  respecting  the  subject-matter  of  the  agency  and  the  pre- 
sumption that  he  has  done  his  duty.'"^  To  the  rule  there 
are  some  exceptions.  Thus,  notice  will  not  be  imputed  to  the 
principal,  if  the  fact  of  which  the  agent  has  knowledge  was 
acquired  by  the  agent  confidentially  as  agent  for  another,  un- 
der such  circumstances  that  it  would  be  a  betrayal  of  confidence 
and  a  breach  of  hi$  duty  to  the  other  principal  to  disclose  it/^' 

Another  exception  is  that  the  knowledge  of  the  agent  will 
not  be  imputed  to  the  principal  when  the  agent  is  engaged  in 
committing  an  jndependent  fraud  upon  his  own  account,  either 
against  his  principal  or  another,  and  the  knowledge  sought  to 
be  imputed  is  of  facts  which  relate  to  the  fraud,  so  that  the 
communication  of  such  knowledge  would  necessarily  prevent 
the  consummation  of  the  fraud.'"  The  principal  is  not  bound 
in  such  cases,  it  is  said,  when  the  character  of  and  nature  of 
the  agent's  knowledge  make  it  intrinsically   improbable  that 

bell,  4  Humph.   (Tenn.)   394.     See  '-Banks  and  Banking,"   Dec.  Dig. 
(Key  No.)  §  116;   Cent.  Dig.  §§  282-287. 

115  National  Security  Bank  v.  Cushmau,  121  Mass.  490.  See 
"Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  116;  Cent.  Dig.  §§ 
282-287. 

116  Distilled  Spirits,  11  Wall.  356,  20  L.  Ed.  167.  See  "Principal 
and  Agent:'  Dec.  Dig.  {Key  No.)  §§  177-182;    Cent.  Dig.  §§  670-600. 

117  Distilled  Spirits,  11  Wall.  350,  20  L.  Ed.  167;  Constant  v. 
University  of  Rochester,  111  N.  Y.  604,  19  N.  E.  631,  2  L.  R.  A. 
734,  7  Am.  St.  Rep.  760.  See  "Princiiial  and  Agent,"  Dec.  Dig.  {Key 
No.)  §  179;    Cent.  Dig.  §§  685-688. 

118  American  Surety  Co.  v.  Pauly,  170  U.  S.  133,  18  Sup.  Ct.  552, 
42  L.  Ed.  977;  Lamson  v.  Beard,  94  Fed.  30,  36  C.  C.  A.  56,  45  L. 
R.  A.  822 ;  Ft.  Dearborn  Nat.  Bank  of  Chicago  v.  Seymour,  71  :Minn. 
81,  73  N.  W.  724 ;  State  Bank  of  Moore  v.  Forsyth.  41  Mont.  249,  108 
Pac.   914,   28  D.  R.   A.    (N.   S.)   501;     Mayor,    etc.,   of  New  York  v. 


§§  85-86)  NOTICE  339 

he  will  inform  his  princij)al.^^''  Whether  the  rule  and  the 
exception  rest  upon  the  presumption  that  the  agent  will  or 
will  not  communicate  the  facts  to  his  principal  has  \)mfi  doubt- 
ed.^-" But,  whatever  the  reason  for  the  exception,  it  is  well 
established. 

Again,  if  the  agent  is  openly  acting  on  his  own  behalf,  and 
necessarily  adversely  to  his  principal,  his  knowledge  will  not 
be  imputed  to  the  latter,  since  he  does  not  represent  him.^-^ 
Thus,  a  director  or  othec  officer,  offering  to  the  bank  for  dis- 
count a  note  of  which  he  is  the  owner,^--  or  proposing  for  a 


Tenth  Nat.  Bank,  111  N.  Y.  44G,  IS  N.  E.  CIS ;  Findley  v.  Cowles, 
93  Iowa,  389.  61  N.  W.  998.  See  "Principal  and  Agent,"  Dec.  Drff. 
(Key  Xo.)  §  ISl;   Cent.  Dig.  §  G90. 

iioHilliard  v.  l.yons.  ISO  Fed.  GS5.  103  C.  C.  A.  651;  Tnnerarity 
V.  Merchants'  National  Bank.  1.39  Mass.  .332,  1  N.  E.  282,  52  Am. 
Rep.  710;  Kuobelooh  v.  (Jerniania  Savings  Bank,  50  S.  C.  2.59. 
27  S.  E.  962.  See,  also,  Bank  of  Overton  v.  Thompson,  118  Fed. 
798,  56  C.  C.  A.  554.  See  "I'rincipal  and  Agent"  Dec.  Dig.  (Key 
No.)  §  181;  Cent.  Dig.  §  690. 

120  "It  has  been  suggested  that  the  true  reason  for  the  exception 
is  that  an  independent  fraud  committed  by  an  agent  on  his  own 
account  is  beyond  the  scope  of  his  employment,  and  therefore 
knowledge  of  it,  as  matter  of  law,  cannot  be  imputed  to  the  prin- 
cipal, and  the  principal  cannot  be  held  responsible  for  it.  On 
this  view,  such  a  fraud  bears  some  analogy  to  a  tort  willfully 
committed  by  a  servant  for  his  own  purposes,  and  not  as  a  means 
of  performing  the  business  intrusted  to  him  by  his  master."  Allen 
V.  South  Boston  R.  Co.,  150  Mass.  200,  22  N.  E.  917,  5  L.  R.  A. 
710,  15  Aai.  St.  Rep.  185.  See,  also,  Gunster  v.  Scranton  Illuminat- 
ing Heat  &  Power  Co.,  181  Pa.  327,  37  Atl.  550,  59  Am.  St.  Rep. 
650;  Knobloch  v.  Germania  Sav.  Bank,  50  S.  C.  259,  27  S.  E.  962; 
Henry  v.  Allen,  151  N.  Y.  1,  45  N.  E.  355,  36  L.  R.  A.  658.  See 
''Principal  and  Agent,"  Dec.  Dig.  (Key  Xo.)  §  181;  Cent.  Dig.  § 
6U0. 

121  Innerarity  v.  Merchants'  National  Bank,  1.39  Mass:  .332.  1  N. 
E.  282.  52  Am.  Rep.  710;  Buffalo  County  Nat.  r.ank  v.  Sharpe,  40 
Neb.  123,  58  N.  W.  734;  First  Nat.  Bank  of  Brandon  v.  Briggs' 
Assignees,  70  Vt.  594,  41  Atl.  580.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §§  116,  111;    Cent.  Dig.  §§  282-288. 

122  Merchants'  Nat.  Bank  of  Kansas  City  v.  Lovitt,  114  Mo.  519, 


'MO  REPRESENTATION  OF  BANK  BY  OFFICERS     (Ch.  10 

loan  of  inoney  on  collateral  security  alleged  to  be  his  own 
property, ^^^  stands  as  a  stranger  to  the  bank,  and  his  knowl- 
edge will  not  be  imputed  to  the  bank.  "While  the  general 
doctrine  is  recognized  that  what  an  agent  knows  his  principal 
is  charged  with  notice  of,  in  transactions  where  said  agent  is 
acting  for  the  principal,  yet  a  bond  director,  in  asking  for  a 
discount  of  his  own  paper,  is  not  an  agent  of  the  bank,  but 
acting  as  the  adverse  contracting  party.  Were  this  held  other- 
wise, no  bank  could  discount  paper,  to  which  a  director  is  a 
party,  without  losing  the  position  of  an  innocent  indorsee  for 
value  under  the  law  merchant.     Hence  no  bank  could  have 


21  S.  W.  825,  35  Am.  St.  Rep.  770;  Benton  v.  German-American 
Nat.  Bank,  122  Mo.  332,  26  S.  W.  975.  See,  also,  Louisiana  State 
Bank  v.  Senecal,  13  La.  525;  State  Sav.  Bank  of  Ionia  v.  Mont- 
gomery,  126  Mich.  327,  85  N.   W.   879. 

"If  Linley  alone  had  acted  in  discounting  the  note,  and  in  plac- 
ing the  proceeds  to  his  own  credit,  the  bank  would  be  bound  by 
his  knowledge  of  the  circumstances  under  which  he  had  obtained 
it  from  the  defendants.  *  *  *  But  he  did  not  act  alone.  The 
cashier  of  the  bank  was  the  officer  who  actually  did  these  things. 
Linley,  in  this  transaction,  was  not  the  representative  of  the  bank." 
First  Nat.  Bank  of  Grafton  v.  Babbidge,  160  Mass.  563,  36  N.  E. 
462. 

Notice  or  knowledge  of  failure  of  consideration  of  a  note,  which 
the  director  of  a  bank  sells  to  it  before  the  maturity,  is  not  im- 
putable to  the  bank,  when  in  the  transaction  the  seller  did  not 
act  for  it  at  all,  but  exclusively  for  himself,  and  the  bank  was 
represented  by  another  of  its  officials,  who  alone  acted  for  it. 
English-American  Loan  &  Trust  Co.  v.  Hiers,  112  Ga.  823,  38  S.  E.  103. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Keg  No.)  §§  IIG,  117;  Cent. 
Dig.  §§  282-288. 

123  The  fact  that  one  who  wrongfully  pledges  to  a  bank,  as  secu- 
rity for  a  loan  made  to  him,  goods  consigned  to  him  for  sale  was 
a  director  in  such  bank,  does  ^ot  commit  the  bank  to  knowledge 
■of  the  wrong.  Innerarity  v.  ilerchants'  National  Bank,  139  Mass. 
332,  1  N.  E.  282,  52  Am.  Rep.  710.  See.  also,  President,  etc.,  of 
Washington  Bank  v.  Lewis,  22  Pick.  (Mass.)  24.  See  "Banks  and 
Banking:'  Dec.  Dig.  (Key  No.)  §§  116,  111;    Cent.  Dig.  §§  282-288. 


§§  85-86)  NOTICE  341 

dealings  in  commercial  paper  with  any  of  its  directors  on  or- 
dinary business  principles."  ^-* 

Some  cases  liolrl  that  if  the  officer,  although  acting^Avowedly 
on  his  own  behalf,  participated  in  the  action  of  the  bank,  as 
by  acting  with  the  discount  committee  or  the  directors  in  pass- 
ing upon  the  discount  or  loan,  his  knowledge  will  be  imputed 
to  the  bank.^^°  But  it  seems  that  the  true  test  is  whether  the 
officer  was  openly  acting  in  his  own  behalf,  and  not  as  the 
representative  of  the  bank.^-®  "The  proposition  that  a  di- 
rector of  a  corporation,"  it  was  said  in  a  leading  case,  "acting 
avowedly  for  himself  or  on  behalf  of  another,  with  whom  he 
is  interested  in  any  transaction,  cannot  be  treated  as  the  agent 
of  the  corporation  therein,  is  well  sustained  by  authority. 
*  *  *  In  some  of  these  cases,  weight  appears  to  be  given 
to  the  fact  that  the  director  was  not  actually  present  at  the 
meeting  when  the  transaction  was  concluded ;  but  this  can- 
not be  of  importance.     If  it  w^ere  shown  that  Burgess  urged 

124  Third  Nat.  Bank  v.  Harrisou  (C.  C)  10  Fed.  243.  See  "Banks 
and  Banl-ing:'  Dec.  Dig.  (Key  No.)  §§  116,  111;  Cent.  Dig.  §§  282- 
2S8. 

125  Where  the  president  and  the  cashier  were  the  discount  com- 
mittee, and  participated  in  discounting  a  note  in  which  the  presi- 
dent was  payee,  the  bank  was  charged  with  his  knowledge.  Le 
Due  V.  Moore,  111  N.  C.  516,  15  S.  E.  8SS.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §§  116,  111;  Cent.  Dig.  §§  282-288. 

128  Where  the  president,  who  with  the  cashier,  constitute  the 
discount  committee,  takes  pai't  in  discounting  a  note  payable  to 
him,  his  knowledge  is  not  imputable  to  the  bank.  Graham  v.  Orange 
County  Nat.  Bank,  59  N.  J.  Law,  225,  35  Atl.  1053. 

"If,  therefore,  the  Thomases  be  considered  as  having  acted  with 
the  other  three  members  of  the  discount  committee,  because  of  their 
presence  at  its  meeting  and  the  requirement  of  the  by-law  that  the 
paper  accepted  by  the  committee  should  'receive  the  unanimous  con- 
sent of  all  members  present  at  the  meeting  before  being  entered,' 
we  nevertheless  think  that  notice  of  the  alleged  fraud  of  the  Thom- 
ases cannot  be  imputed  to  plaintiff."  Lilly  v.  Hamilton  Bank  of 
New  York,  ITS  Fed.  53,  102  C.  C.  A.  1,  20  L.  R.  A.  (N.  S.)  558.  See, 
also,  Terrell  v.  Branch  Bank  at  Mobile,  12  Ala.  502.  See  "Banks 
and  Bunking,"  Dec.  Dig.  {Key  No.)  §§  116,  111;  Cent.  Dig.  §§  282- 
288. 


342  REPRESENTATION   OF    BANK  BY   OFFICERS  (Ch.  10 

the  loan  upon  the  board  of  directors,  and  actually  voted  in 
favor  of  it,  his  associates  not  seeing  fit  to  intervene  or  object 
to  this  conduct,  he  would  still  have  acted  on  his  own  behalf, 
and  of  those  whose  interests  and  efforts  were  of  necessity 
adverse  to  those  of  the  corporation.  To  assume  that,  under 
such  circumstances,  the  facts  he  knew  were  communicated  to 
the  directors,  and  that  he  laid  before  them  the  fraud  he  was 
committing  in  wrongfully  pledging  property,  would  be  a  pre- 
sumption too  violent  for  belief,  and  would  do  great  injustice 
to  the  remaining  directors  and  the  interests  they  repre- 
sented." ^-'  The  principle  is  the  same  where  the  bank  officer 
in  such  a  case  is  openly  acting  as  an  officer  of  another  cor- 
poration,^-''  or  otherwise  as  the  representative  of  another 
person,^-'*  for  in  such  case  the  officer,  in  procuring  the  dis- 
count or  loan,  represents  the  adverse  party. 

Cases  where  the  bank  is  not  charged  with  the  knowledge  of 
its  officer  because  he  is  engaged  in  committing  an  independent 
fraud  upon  his  own  account,  as  well  as  cases  where  the  bank 
is  not  so  charged  because  he  is  openly  acting  in  his  own  behalf 
or  in  behalf  of  another,  are  to  be  distinguished  from  cases 
where,  although  his  conduct  was  fraudulent,  he  does  act  on  the 
bank's  behalf  as  its  sole  representative  in  the  transaction,  and 
the  bank  is  endeavoring  to  retain  an  advantage  or  to  assert 
a  claim  founded  on  the  officer's  act,  for  in  such  case  the 
bank  cannot  avail  itself  of  the  officer's  act  without  being  re- 

127  innerarity  v.  Merchants'  National  Bank,  139  Mass.  332,  1  N. 
E.  282,  52  Am.  Rep.  710.  See  ''Banks  and  Banking,"  Dec.  Diy. 
{Key  A^o.)  §§  116,  111;    Cent.  Dig.  §§  282-2SS. 

128  Holm  y.  Atlas  Nat.  Bank,  84  Fed.  119,  28  C.  C.  A.  297;  Cor- 
coran V.  Snow  Cattle  Co.,  151  Mass.  74,  23  N.  E.  727;  Merchants' 
Nat.  Bank  of  Gardner  v.  Clark,  139  N.  Y.  314,  34  N.  E.  910,  36  Am. 
St.  Rep.  710;  Commercial  Bank  of  Danville  v.  Burgwyn,  110  N.  C. 
2G7,  14  S.  E.  623,  17  L.  R,  A.  32G ;  Martin  v.  South  Salem  Land  Co., 
94  Va.  28,  26  S.  E.  591.  See  "Banks  and  Banking,''  Dec.  Dig.  (Keg 
No.)  §§  116,  111;   Cent.  Dig.  %l 282-288. 

120  Mayor,  etc.,  of  New  York  v.  Tenth  Nat.  Bank,  111  N.  Y.  446,  IS 
N.  E.  618;  National  Bank  of  Commerce  of  Pierre  v.  Feeney,  9  S. 
D.  550,  70  N.  W.  874,  46  L.  R.  A.  732.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §§  110.  111 ;    Cent.  Dig.  §§  282-288. 


§§  85-86)  NOTICE  343 

sponsible  for  his  knowledge. ^■■'*'  Thus,  where  the  president 
of  a  bank,  having-  embezzled  funds  of  llie  bank  on  deposit  with 
its  reserve  agent,  replaced  ilic  funds  witii  money  borrowed  by 
him  on  the  bank's  note,  without  the  directors'  knowledge,  and 
the  borrowed  money  was  afterwards  drawn  out  to  pay  the 
bank's  debts,  it  was  held  that  the  bank,  having  received  the 
benefit  of  the  money  through  the  agency  of  the  presirlent, 
could  not  retain  it  without  assuming  the  burden  of  the  presi- 
dent's knowledge  as  to  how  it  came  to  be  obtained,  and  hence 
was  liable  to  the  lender  as  for  money  had  and  received  to 
its  use.^^^  So,  where  the  maker  of  a  note  delivered  it  uncon- 
ditionally, and  while  the  condition  remained  unfulfilled  the 
payee  indorsed  it  to  a  bank  of  which  he  was  president  and 
general  manager,  acting  as  the  sole  representative  of  the  bank 

130  Where  the  defaulting  treasurer  of  a  corporation,  whose  de- 
falcation is  unknown,  steals  money  from  a  third  person  and  places 
it  with  the  funds  of  the  corporation  in  order  to  conceal  and  make 
good  his  defalcation,  without  the  knowledge  of  any  other  officer, 
the  corporation,  having  used  the  money  as  its  own.  does  not  thereby 
acquire  good  title  to  it,  since  it  is  charged  with  the  knowledge  of 
the  treasurer,  who  was  its  sole  representative  in  the  transaction. 
"The  effect  of  knowledge,"  said  the  court,  "is  to  put  the  plaintiff  in 
the  same  position  that  it  would  be  in  if  there  were  no  pretense  of 
a  consideration  moving  from  it.  In  order  to  entitle  it  to  retain 
the  defendant's  funds,  both  elements  must  exist — a  -good  considera- 
tion, and  the  want  of  knowledge  that  the  funds  belonged  to  the 
defendant.  Such  want  of  knowledge  cannot,  in  the  view  of  the 
law,  exist,  where  the  party  in  the  particular  transaction  is  rep- 
resented solely  by  one  who  has  knowledge.  The  rule  is  general  that 
if  one  assumes  to  do  an  act  which  will  be  for  the  benefit  of  another 
commits  a  fraud  in  so  doing,  and  the  person  to  whose  benefit  the 
fraud  will  inure  seeks  after  knowledge  of  the  fraud  to  avail  him- 
self of  that  act  and  to  retain  the  benefit  of  it,  he  must  be  held  to 
adopt  the  whole  act,  fraud  and  all,  and  to  be  chargeable  with  the 
knowledge  of  it,  so  far,  at  least,  as  relates  to  his  right  to  retain 
the  benefit  so  secured."  Atlantic  Cotton  Mills  v.  Indian  Orchard 
Mills,  147  Mass.  268,  17  N.  E.  49(5,  9  Am.  St.  Kep.  69S.  See  ''Banks 
and  Banking,"  Dec.  Birj.  {Key  ^o.)  §§  116,  111 ;  Cent.  Dig.  §§"'.282- 
2SS. 

131  Ditty  v.   Dominion  Nat.  Bank,  75  Fed.  7(i9,  22  C.   C.  A.  .S7() 
See,  also,  Loring  v.  Brodie,  134  Mass.  A~j?>  ;    First  Nat.  Bank  v.  Dun- 


344  REPRESENTATION   OF    BANK  BY   OFFICERS  (Ch.  10 

in  the  transaction,  it  was  held  that  the  bank  was  '.harged  with 
knowledge,  and  could  not  sue  on  the  note  until  iae  condition 
was  performed.  "It  is  well  settled,"  said  the  court,  "that  an 
officer  or  agent,  dealing  with  a  corporation  or  his  principal 
on  his  own  account,  is  not  presumed  to  communicate  knowl- 
edge which  it  would  be  to  his  interest  to  conceal,  and  the  cor- 
poration or  principal  is  not  chargeable  with  such  knowledge. 
But  there  is  no  room  for  the  application  of  this  principle  where 
the  agent  is  the  sole  representative  of  both  parties  in  the 
transaction."  ^^^  By  some  courts  this  d/stinction  is  not 
recognized. ^^^ 

bar,  lis  111.  62.0,  9  N.  E.  186.  See  "Banks  and  Botilcing,"  Dec.  Dig. 
(Key  No.)  §§  116.  Ill;    Cent.  Dig.  §§  282-288. 

132  First  Nat.  Bank  v,  Blake  (C.  C.)  €0  Fed.  78.  See,  also,  Niblack 
V.  Cosier  (C.  C.)  74  Fed.  1000,  affirmed  SO  Fed.  596,  26  C.  C.  A.  16 ; 
First  Nat.  Bank  of  New  Milford  v.  Town  of  New  Milford,  36  Conn,  m  ; 
Lowndes  v.  City  Nat.  Bank  of  South  Norwalk.  82  Conn.  8,  72  Atl. 
1.50.  22  L.  R.  A.  (N.  S.)  408;  Morris  v.  Georgia  Loan,  Savings  & 
Banking  Co.,  109  Ga.  12,  34  S.  E.  378,  46  L.  R.  A.  506;  Fouche  v. 
Merchants-  Nat.  Bank  of  Rome,  110  Ga.  827,  36  S.  E.  256 ;  Oak 
Grove  &  Sierra  Verde  Cattle  Co.  v.  Foster,  7  N.  M.  650,  41  Pac 
522;  Holden  v.  New  York  &  E.  Bank,  72  N.  Y.  286;  Gunster  v. 
Scranton  Illuminating  Heat  &  Power  Co.,  181  Pa.  327,  37  Atl.  550, 
59  Am.  St.  Rep.  650;  Cook  v.  American  Tubing  &  Webbing  Co.,  2^ 
R.  I.  41,  65  Atl.  641,  9  L.  R.  A.   (N.   S.)  193. 

"It  is  true  that  there  is  another  aspect,  which  does  not  seem 
less  probable,  and  that  is  that  McNeil,  in  the  first  instance,  ex- 
changed the  bank's  money  for  the  notes  himself.  In  that  view,  as 
it  was  through  McNeil's  hand  that  the  ba'nk  became  possessed  of 
the  notes,  it  would  be  much  more  difficult  to  maintain  that  the 
bank  was  not  chargeable  with  his  knowledge,  or  that  an  innocent 
ratification  could  change  the  character  of  the  original  transaction. 
Atlantic  Cotton  Mills  v.  Indian  Orchard  Mills,  147  Mass.  268,  17 
N.  E.  496  [9  Am.  St.  Rep.  698]."  Per  Holmes,  J.,  in  Corcoran  v. 
Snow  Cattle  Co.,  151  Mass.  74.  23  N.  E.  727.  See  "Banlcs  and 
Banking;'  Dec.  Dig.  (Key  So.)  §§  116,  111;    Cent.  Dig.   §§  282-288. 

133  See  Bank  of  Overton  v.  Thompson,  IIS  Fed.  798,  56  C.  C.  A. 
554;  First  Nat.  Bank  v.  Northup,  82  Kan.  638,  109  Pac.  672.  33 
L.  R.  A.  (N.  S.)  733,  136  Am.  St.  Rep.  119;  First  Nat.  Bank  of  Nephi 
V.  Foote,  12  Utah,  157,  42  Pac.  205.  See  "Banks  and  Banking;^  Dec. 
Dig.  (Key  No.)  §§  116.  117;  Cent.  Dig.  §§  282-288. 


§§  87-88)  INSOLVENCY  345 


CHAPTER  XI  ^^ 

INSOLVENCY 

87.  In  General. 

88.  Liquidation — Preferences. 

89.  Deposit  after  Insolvency, 

90.  Checks  and  Drafts. 

91.  Set-Off. 

92.  Wronfe'ful    Receipts    of   Deposit— Following   Trust   Fund— Pref- 

erence. 

IN  GENERAL 

87.  When  a  bank,  from  its  inability  to  meet  its  obligations 

in  the  usual  course  of  business,  is  insolvent,  it  is 
its  duty  to  cease  from  banking  operations. 

88.  LIQUIDATION— PREFERENCES— The    liquidation 

of  insolvent  banking  corporations  is  generally  reg- 
ulated by  statutes,  which  prohibit  transfers  and 
payments  after  an  act  of  insolvency,  or  in  contem- 
plation of  insolvency,  with  a  view  to  the  prefer- 
ence of  one  creditor  to  another. 

Dissolution 

A  banking  corporation,  like  other  private  corporations,  may 
be  dissolved  in  various  ways,  as  by  expiration  of  its  charter, 
or  by  forfeiture  of  its  charter  for  misuser  or  nonuser  of  its 
powers.  A  forfeiture  takes  efifect  only  upon  the  judgtnent  of 
a  competent  court,  unless  the  legislature  has  provided  other- 
wise. In  most  states  there  are  statutes  prescribing  the  manner 
in  which  the  business  of  dissolved  banking  corporations  may 
be  liquidated  and  settled,  and  the  rights  and  equities  of  the 
creditors  and  stockholders  may  be  enforced.^     No  discussion 

1  See  Clark,  Corp.  (2d  Ed.)  2.30-250.  See  ''Banks  and  BanJcinrj," 
Dec.  nig.  {Key  'No.)  §§  (^3-12;   Cent.  Dig.  §§  125-153. 


346  INSOLVENCY  (Ch.  11 

of  these  matters  will   be  undertaken,   except  in   relation   to 
national  banks. ^ 
Insolvency — In  General 

A  bank  is  insolvent  when  its  assets  are  insufficient  to  pay 
its  obligations  as  they  become  due  in  the  ordinary  course  of 
business.-'  It  then  becomes  the  duty  of  the  bank  to  cease  from 
further  banking  operations  and  to  go  into  liquidation.  When 
it  is  not  otherwise  provided  by  statute,  a  bank  may  make  an 
assignment  for  the  benefit  of  creditors.*  By  the  federal  bank- 
ruptcy act,  both  state  and  national  banks,  but  not  private 
bankers,  are  excepted  from  the  class  of  persons  who  may  be 
adjudged  involuntary  bankrupts.^  The  liquidation  of  the  af- 
fairs of  banking  corporations,  voluntary  and  involuntary,  is 
commonly  regulated  by  statutes,  and  will  not  be  discussed,  ex- 
cept in  relation  to  national  banks." 
Transfers  and  Payments  Affected  by  Insolvency — Preferences 

It  is  very  generally  held  that  a  banking  corporation,  like 
an  individual,  when  not   forbidden  by   statute,  may  lawfully 

2  Post.  p.  422. 

3  Harmanson  v.  Bain.  Fed.  Cas.  No.  6.072,  1  Hughes,  1S8;  Dodge 
V.  Mastin  (C.  C.)  17  Fed.  660-665;  Hayden  v.  Chemical  Nat.  Bank. 
84  Fed.  874,  876,  28  C.  C.  A.  548;  State  v.  Caldwell.  79  Iowa.  4:^,2. 
44  N.  W.  700 ;    State  v.  Myers,  54  Kan.  200,  38  Pac.  296. 

Though  a  bank,  when  it  suspended,  had  funds  on  hand  to  meet 
the  demands  against  it  on  that  day,  in  the  ordinary  course  of  busi- 
ness, it  was  insolvent  if  its  property  was  insufficient  to  pay  all  its 
debts.     Higgins  v.  Wortbington.  12  App.  Div.  361.  42  N.  Y.  Supp.  737. 

A  banli  is  insolvent  when,  from  the  uncertainty  of  being  able  to 
realize  on  its  assets  in  a  reasonable  time,  a  sufficient  amount  to 
meet  its  liabilities,  it  becomes  necessary  for  the  control  of  its  af- 
fairs to  pass  out  of  its  hands.  Livingstain  v.  Columbian  Banking 
&  Trust  Co.,  81  S.  C.  244,  62  S.  E.  250,  22  L.  R.  A.  (N.  S.)  445.  -See 
''Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  73;   Cent.  Dig.  §  iJ-i. 

4  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  78;  Cent.  Dig. 
§  i77. 

s  Act  July  1,  189S,  c.  541,  §  4,  30  Stat.  547  (U.  S.  Comp.  St,  1901, 
p.  3423),  as  amended  by  Act  Feb.  5,  1903,  c.  487,  §  3,  32  Stat.  797 
(U.  S.  Comp.  St.  Supp.  1909,  p.  1309). 

6  Post,  pp.  411,  413. 


g§   87-88)  IN   GENERAL  347 

prefer  certain  creditors/  Many  states,  however,  by  statute 
prohibit  transfers  and  payments  by  a  bank  made  after  an  act 
of  insolvency,  or  in  contemplation  of  insolvency,  \i^h  a  view 
to  a  preference.^  Such  is  the  provision  of  the  National  Bank 
Act.®  These  statutes  make  a  transfer  or  payment  void,  when 
there  is  an  intention  on  the  part  of  the  bank  to  prefer  a  cred- 
itor, although  the  creditor  receiving  the  transfer  or  ])ayment 
is  without  knowledge  or  suspicion  of  the  insolvency.^'' 

A  payment  is  not  necessarily  invalid,  however,  because  made 
after  the  bank's  insolvency,  or  even  after  its  managers  be- 
come aware  of  its  insolvency.  So  long  as  it  is  a  going  con- 
cern, carrying  on  its  business  as  usual,  and  has  committed 
no  act  of  insolvency,  and  a  present  suspension  of  business  is 
not  contemplated,  although  the  bank  is  actually  insolvent,  a 
payment  to  a  depositor  or  other  creditor  in  the  usual  course  of 
business  is  not  made  in  contemplation  of  insolvency  or  with 
a  view  to  a  preference  under  the  statute. ^^     It  is  otherwise 

7  Catlin  Y.  Eagle  Bank  of  New  Haven.  6  Conn.  233.  See  Merced 
Nat.  Bank  v.  Ivett,  127  Cal.  134,  59  Pac.  303.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  U,;   Cent.  Dig.  §§  156,  179. 

8  See  Robinson  v.  Aird.  43  Fla.  30,  29  Sovith.  633;  Brijihton  v. 
White,  128  lud.  320,  27  N.  E.  620;  Braduer  v.  Woodruff,  .52  Hun, 
214,  5  N.  Y.  Supi).  207.  Sec  "Banks  and  Bunking,"  Dec.  Dig.  {Key 
No.)  §  7//;    Cent.  Dig.  §  156. 

9  Post.  p.  421, 

10  National  Security  Bank  v.  Butler,  129  U.  S.  223,  9  Sup.  Ct.  2S1. 
32  L.  Ed.  082;  Case  v.  Citizens'  Bank  of  Louisiana,  Fed.  Cas.  No. 
2.489.  2  Woods,  23.  See,  also,  Hayden  v.  Chemical  Nat.  Bank,  84 
Fed.  874,  28  C.  C.  A.  548. 

Some  statutes  except  from  their  operation  purchases  for  value  with- 
out notice  of  the  insolvency.  See  Hill  v.  Western  &  A.  R.  Co.,  86  Ga. 
284,  12  S.  E.  635 ;  Clarke  v.  Insram,  107  Ga.  565,  33  S.  E.  802.  See, 
also,  Atkinson  v.  Rochester  Printing  Co.,  114.  N.  Y.  168,  21  N.  E.  178. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  7.};  Cent.  Dig.  § 
156. 

14  McDonald  v.  Chemical  Nat.  Bank,  174  V.  S.  610,  19  Sup.  Ct.  787, 
43  L.  Ed.  1106,  affirming  Hayden  v.  .Chemical  Nat.  Bank,  84  Fed. 
874,  28  C.  C.  A.  548;    Dutcher  v.  Importers'  &  Traders'  Nat.  Bank. 


;j48  INSOLVENCY  (Cll.  11 

if  the  payment  is  not  made  in  the  usual  course  of  business, 
although  the  payee  is  ignorant  of  the  insolvency.^-  Thus,  a 
payment  to  a  depositor  during  a  "run"  on  the  bank,  while 
the  bank,  although  actually  insolvent,  is  continuing  in  business 
and  making  payments  in  usual  course,  in  the  expectation  that 
if  it  can  continue  in  business  it  will  be  able  to  meet  all  its 
obligations,  has  been  held  not  to  be  a  preference.^^ 

While  the  disposition  by  a  bank  of  its  assets,  when  insol- 
vent or  in  contemplation  of  insolvency,' with  a  view  to  a  prefer- 
ence, is  forbidden,  liens,  equities,  and  rights  arising  prior  to 


59  N.  Y.  5  (cf.  Atkinson  v.  Rochester  Printing  Co.,  114  N.  Y.  168, 
21  N.  E.  178) ;  Hayes  v.  Beardsley,  136  N.  Y.  299,  32  N.  E.  855 ;  post, 
p.  423. 

A  director  In  a  bank,  being  also  the  president  of  defendant  cor- 
poration, informed  it  of  the  impending  insolvency  of  the  bank,  where- 
on it  drew  its  check  for  its  balance  on  deposit  in  the  bank,  which 
was  signed  by  its  president,  and  the  full  amount  of  the  deposit  was 
secured  on  the  same  day  that  the  bank  closed.  Held,  that  the  trans- 
action was  not  void,  as  a  violation  of  a  statute  prohibiting  an  in- 
solvent corpo;-ation,  or  any  of  its  officers,  from  converting  its  property 
to  its  members  for  other  consideration  than  full  value  in  cash,  and 
from  making  any  assignment  preferring  creditors,  since  there  was 
nothing  in  such  provision  to  prevent  a  depositing  corporation  from 
withdrawing  its  money  on  information  received  by  its  president,  as 
director,  of  the  bank's  insolvency.  O'Brien  v.  East  River  Bridge  Co., 
161  N.  Y.  539,  56  N.  E.  74,  48  L.  R.  A.  122.  See  "Banks  and  Bank- 
ing,'' Dec.  Dig.  {Key  'S'o.)  §  lit;    Cent.  Dig.  §  156. 

12  James  Clark  Co.  v.  Colton,  91  Md.  195,  40  Atl.  386,  49  L.  R.  A. 
698.  But  see  McAfee  v.  Bland  (Ky.)  11  S.  W.  439.  Under  some  stat- 
utes, although  the  payment  was  not  in  due  course,  if  the  payee  was 
ignorant  of  the  insolvency  and  of  the  intent  to  prefer,  he  is  pro- 
tected. McGregor  v.  Battle,  128  Ga.  577,  58  S.  E.  28,  13  L.  R.  A. 
(X.  S.)  185.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  74; 
Cent.  Dig.  §  156. 

13  stone  V.  Jenison,  111  Mich.  592,  70  X.  W.  149,  36  L.  R.  A.  675; 
Livingstain  v.  Columbian  Banking  &  Trust  Co.,  81  S.  C.  244,  62  S. 
E.  249,  22  L.  R.  A.  (N.  S.)  445.  See,  also,  McGregor  v.  Battle.  128 
Ga.  577,  58  S.  E.  28,  13  L.  R.  A.  (N.  S.)  185.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  7^;   CeJit.  Dig.  §  156. 


§    89)  DEPOSIT   AFTER    INSOLVENCY  349 

and  not  in  contemplation  of  insolvency  are  not  invalidated.^* 
The  prohibition  is  against  giving  a  preference,  and  not  against 
giving  security  when  a  debt  is  created  for  a  loan  made  at  the 
time,  and  in  such  case  the  creditor  can  retain  the^security  until 
the  debt  is  paid,  though  the  bank  was  insolvent  to  the  knowl- 
edge of  the  creditor. ^•'^  But  the  giving  of  security  for  an 
antecedent  debt,  under  such  circumstances,  is  invalid  as  a 
preference.^" 

DEPOSIT  AFTER  INSOLVENCY 

89.  The  reception  of  a  deposit  by  a  bank  with  knowledge  on 
its  part  that  it  is  hopelessly  insolvent  is  fraudulent, 
and  the  bank  thereby  becomes  a  constructive  trus- 
tee of  the  deposit,  and  the  depositor  may  recover 
the  deposit,  if  it  can  be  identified  in  the  hands  of  a 
receiver  or  an  assignee  for  the  benefit  of  creditors 
of  the  insolvent  bank. 

The  relation  between  a  bank  and  its  depositor  being  merely 
that  of  debtor  and  creditor,  the  depositor  is  entitled  to  no  pref- 
erence upon  the  bank's  insolvency,  but  must  come  in  with  the 
other  general  creditors. ^'^     For  a  bank  to  receive  deposits  with 

14  Scott  V.  Armstrong.  146  U.  S.  499,  13  Sup  Ct.  148,  36  L.  Ed. 
1059;  post,  p.  423.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§§  74,  286;    Cent.  Dig.  §§  156,  1111. 

15  See  Harris  v.  Randolph  Ck)unty  Bank,  157  Ind.  120,  60  N.  E. 
1025. 

Where  a  bank  executed  its  note  to  a  clearing  house  association 
in  return  for  certificates  and  deposited  collateral,  no  preference  was 
created.  Booth  v.  Atlanta  Clea ring-House  Ass'n,  132  Ga.  100,  63  S. 
E.  907.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  74;  Cent. 
Dig.  §  156. 

10  Burrell  v.  Bennett,  20  Wash.^644,  56  Pac.  375;  post,  p.  423.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  74;   Cent.  Dig.  §  156. 

17  Bayor  v.  American  Trust  &  Savings  Bank,  157  111.  62,  41  N.  E. 
622;  Bank  of  Slackwell  v.  Dean,  9  Okl.  626,  60  Pac.  226;  la  re 
Franklin  Bank,  1  Paijre  (N.  Y.)  249,  19  Am.  Dec.  413;  ante,  p.  12. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  75;   Cent.  Dig.  §  157. 


350  INSOLVENCY  (Ch.  11 

knowledge  of  the  hopeless  insolvency,  however,  is  fraudulent, 
and  in  such  case  the  depositor  may  rescind  the  transaction  and 
recover  back  his  deposit  from  the  bank,  which  becomes  a  con- 
structive trustee  ex  maleficio,  and  holds  the  deposit  for  the  use 
of  the  depositor.^^  "A  banker,  who  is,  to  his  own  knowledge, 
hopelessly  insolvent,  cannot  honestly  continue  his  business,  and 
receive  the  money  of  his  customers,  and.  although  having  no 
actual  intent  to  cheat  and  defraud  a  particular  customer,  he 
will  be  held  to  have  intended  the  inevitable  consequences  of 
his  act ;  i.  e.,  to  cheat  and  defraud  all  persons  whose  money 
he  receives  and  whom  he  fails  to  pay  when  he  is  compelled  to 
stop  business."  ^^  Since  the  depositor's'  right  of  recovery  is 
based  on  fraud,  there  can  be  no  recovery,  although  the  bank 
was  insolvent,  unless  it  appears  that  the  insolvency  was  known 
to  its  officers.^ °  It  has  been  held  that  the  mere  fact  that  the 
bank  was  in  an  embarrassed  condition  is  not  enough  to  prove 
fraud:^^  "The  insolvency  rnust  be  of  such  a  character  that 
it  was  manifestly  impossible  for  the  bankers  to  continue  in 
business  and  to  meet  their  obligations,  and  the  fact  must  have 

18  St.  Louis  &  S.  F.  Ry.  Co.  v.  Johnston,  133  U.  S.  566.  10  Sup.  Ct. 
390,  33  L.  Ed.  683 ;  City  of  Somerville  v.  Beal  (C.  C.)  40  Fed.  TOO ; 
Wasson  v.  Hawkins  (C.  C.)  59  Fed.  233;  Richardson, v.  New  Orleans 
Debenture  Redemption  Co.,  102  Fed.  781,  42  C.  C,  A.  619,  52  L.  R. 
A.  67 ;  First  Nat.  Bank  v.  Strauss,  06  Miss.  479,  6  South.  232,  14  Am. 
St.  Rep.  579;  Higgins  v.  Hayden,  53  Neb.  61,  73  N.  W.  280;  Cragie 
V.  Hadley,  99  N.  T.  131,  1  N.  E.  537,  52  Am.  Rep.  9 ;  Orme  v.  Baker. 
74  Ohio  St.  337,  78  N.  E.  439,  113  Am.  St.  Rep.  968.  See  "Banks  and 
Banlinfj,"  Dec.  Dig.  (Key  No.)  §  75;   Cent.  Dip.  §  157. 

i9Anonymous,  67  N.  Y.  598.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  A'o.)  §  75;   Cent.  Dig.  §  157. 

20  Furber  v.  Dane,  204  Mass.  412.  90  N.  E.  859.  27  L.  R.  A.  (N.  S.) 
808 ;  Perth  Amboy  Gaslight  Co.  v.  Middlesex  County  Bank.  60  N.  J.  Eq. 
84,  45  Atl.  704 ;  People  v.  St.  Nicholas  Bank,  77  Hun,  159,  28  N.  Y. 
Supp.  407 ;  New  York  Breweries  Co.  v.  Higgins,  79  Hun,  250,  29  N. 
Y.  Supp.  416!.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  75; 
Cent.  Dig.  §  157. 

21  Quin  V.  Earle  (C.  C.)  95  Fed.  728.  See  '-Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  75;    Cent.  Dig.  §  157. 


§    89)  DEPOSIT   AFTER   INSOLVENCY  351 

been  known  to  the  bankers,  so  as  to  justify  the  conclusion 
that  the  bankers  accepted  the  depositor's  money  knowing  that 
they  would  not  and  could  not  respond  when  the  depjjsitor  de- 
manded it."  -- 

If  the  deposit  is  in  the  form  of  money  which  has  not  been 
mingled  with  the  bank's  funds,  the  depositor  can  maintain  re- 
plevin for  it;-^  and  so,  when  the  deposit  is  in  the  form  of 
a  check  or  other  paper,  so  long  as  it  remains  in  the  hands  of 
the  bank  or  receiver.^*  If  the  deposit  is  in  the  form  of  money, 
which  has  been  mingled  with  the  bank's  funds,  the  depositor 
may  recover  the  fund,  if  it  can  be  identified. ^^  The  right 
to  reclaim  the  pajier  or  the  money  in  such  cases  is  not  pre- 
cluded by  the  provisions  forbidding  preferential  transfers  and 
payments,  and  requiring  ratable  distribution  of  the  assets 
among  the  creditors,  since  the  plaintiff  does  not  claim  under 
a  transfer  from  the  bank,  but  under  his  original  title ;  that  is, 
he  is  not  seeking  to  enforce  a  right  as  creditor  of  the  bank, 
but  to  reclaim  his  own  property  obtained  by  fraud,  and  while 
the  right  may  be  defeated  by  the  acts  or  acquiescence  of  the 
defrauded  party,  or  because  his  property  has  lost  its  identity 
and  cannot  be  traced,  or  because  others  have  innocently  ac- 

2  2  Williams  v.  Van  Norden  Trust  Co.,  104  App.  Div.  251.  93  N.  Y. 
Supp.  821.  Sec  ''Banhs  and  Banking;'  Dec.  Die/.  (Key  No.)  §  7J; 
Cent.  Diii.  §  1'>1. 

2  3  Fiirber  v.  Stephens  (C.  C.)  35  Fed.  17.  Sec  "Banlcs  and  Bank- 
ing;' Dec.  Pig.  {Key  No.)  §  75;   Cent.  Dig.  §  157.- 

24  Richardson  v.  Denegre.  93  Fed.  572,  35  C.  C.  A.  452;  American 
Trust  ct  Sav.  IJank  v.  Gueder  &  Paeschke  Mfg.  Co.,  150  III.  336, 
37  N.  E.  227.  See,  also.  Showalter  v.  Cox,  97  Tenn.  547,  37  S.  W. 
28(5 ;  Bruner  v.  First  Nat.  Bank,  97  Tenn.  540,  37  S.  W.  28G,  34  L.  R. 
A.  532  ;  Hyland  v.  Roe.  Ill  Wis.  3G1,  87  N.  W.  2.52,  87  Am.  St.  Rep. 
873. 

The  depositor  may  recover  it  from  one  to  whom  it  has  passed  who 
is  not  a  holder  in  due  course.  Spring  Brook  Chemical  Co.  v.  Dunn, 
39  App.  Div.  130,  57  N.  Y.  Supp.  100.  See  "Banks  and  Banking;'  Dec. 
Dig.  {Key  No.)  §  75;   Cent.  Dig.  §  157. 

2  5  Post,  p.  .354. 


352  INSOLVENCY  (Ch.  11 

quired  interests  in  ignorance  of  the  fraud,  the  other  creditors 
have  no  equity  to  have  the  plaintiff's  property  applied  in  pay- 
ment of  the  obligations  of  the  bank.^' 


CHECKS  AND  DRAFTS 

90.  The  holder  of  a  check  or  draft  issued  by  a  bank  has  no 
right  upon  its  insolvency  to  a  preference  over  the 
general  creditors. 

Since  a  check  does  not  operate  as  an  assignment  of  any 
part  of  the  funds  to  the  credit  of  the  drawer  with  the  drawee, 
a  check  given  by  a  bank  confers  upon  the  payee  no  right, 
upon  the  drawer's  insolvency,  to  a  preference  over  its  general 
creditors.-'  Of  course,  upon  the  insolvency  of  the  drawee, 
the  holder  of  the  check,  having  no  rights  as  against  the  drawee, 
has  no  right  to  a  preference  over  its  general  creditors.^ ^  The 
certification  of  a  check  creates  no  trust  in  favor  of  the 
holder,  and  gives  no  lien  on  any  portion  of  the  assets.-^® 

26Cragie  v.  Hadley,  99  N.  T.  131,  1  N.  E.  537,  52  Am.  Rep.  9. 
See,  also,  Richardson  v.  Oliver,  105  Fed.  277,  44  C.  C.  A.  4G8,  53 
L.  R.  A.  113;  Impoi-ters'  &  Traders'  Nat.  Bank  v.  Peters,  123  N. 
Y.  272,  25  N.  E.  319;  Harris  v.  First  Nat.  Bank  of  Jolinson  City 
(Tenn.)  41  S.  W.  10S4.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key 
No.)  §  75;   Cent.  Dig.  §§  157,  1116. 

27  Jewett  V.  Yardley  (C.  C.)  81  Fed.  920;  Clark  v.  Toronto  Bank. 
72  Kan.  1,  82  Pac.  582,  2  L.  R.  A.  (N.  S.)  83,  115  Am.  St.  Rep.  173 ; 
Grammel  v.  Carmer,  55  Mich.  201,  21  N.  W.  418,  54  Am,  Rep.  303. 
See,  also.  Citizens'  Nat.  Bank  v.  Dowd  (C.  C:)  35  Fed.  340.  But 
see  Livingstain  v.  Columbian  Banking  &  Trust  Co.,  81  S.  C.  244. 
62  S.  E.  249,  22  L,  R.  A.  (N.  S.)  445;  ante,  p.  127.  See  "Banks  and 
Banking;'  Dee.  Dig.  (Key  yo.)  §  SO;    Cent.  Dig.  §  192. 

2  8  Harrison  v.  Wright,  100  Ind.  515,  58  Am.  Rep.  805.  See  "Banks 
and  Banking;'  Dec.  Dig.  (Key  No.)  §  SO;    Cent.  Dig.  §  192. 

2  9  People  V.  St.  Nicholas  Bank,  77  Hun,  159,  28  N.  Y.  Supp.  407. 
See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  80;  Gent.  Dig. 
§  102. 


§  91)  SET-OFr  353 


SET-OFF 

91.  A  debtor  of  an  insolvent  bank  may  set  off  a^inst  his 
indebtedness  a  debt  due  him  from  the  bank. 

As  already  shown,  a  depositor  has  a  right  to  set  off  a  gen- 
eral deposit  against  his  matured  debt  to  the  bank,  and,  upon 
its  insolvency,  may  exercise  this  right,  even  if  the  debt  did 
not  mature  until  after  the  insolvency.^"  And  in  general,  in 
an  action  by  the  receiver  or  assignee  of  an  insolvent  bank 
against  a  debtor,  he  may  set  off  against  his  indebtedness  a 
debt  due  him  from  the  bank  at  the  time  of  the  insolvency, ^^ 
even  though  such  debt  had  not  been  matured ;  ^^  but  he  may 
not  set  off  a  claim  against  the  bank  which  he  has  acquired 
subsequently.^^  The  right  of  a  bank,  or  of  its  receiver  or 
assignee,  to  apply  a  deposit  to  the  payment  of  the  depositor's 
debt  to  the  bank,  has  been  already  considered.^* 

3  0  Ante,  p.  73. 

31  Brown  v.  Sheldon  State  Bank,  139  Iowa,  S3,  117  N.  W.  289; 
Finnell  v.  Nesbit,  16  B.  Men.  (Ky.)  351;  Salladin  v.  Mitchell.  42 
Neb.  859,  61  N.  W.  127;  .Jackson  v.  Receivers  of  People's  Bank  of 
Patterson,  9  N.  J.  Eq.  205 ;  Davis  v.  Industrial  Mfg.  Co.,  114  N.  C. 
321,  19  S.  E.  371,  23  L.  R.  A.  322;  Armstrong  v.  Warner,  49  Ohio 
St.  376,  31  N.  E.  877,  17  L.  R.  A.  466 ;  Far'ners'  Deposit  Nat.  Bank 
Y.  Penn  Bank,  123  Pa.  283,  16  Atl.  761,  2  L.  R.  A.  273. 

Where,  on  the  insolvency  of  a  bank, '  the  lessor  of  its  banking 
house  was  indebted  to  it  on  a  demand  note,  he  was  not  entitled  to 
set  off  a  claim  for  damages  for  breach  of  the  lease  by  the  bank 
against  its  claim  on  the  note.  McGraw  v.  Union  Trust  Co.,  135 
Mich.  009,  98  N.  W.  390.  Set  "Banks  and  Banking,"  Dec.  Dig.  {Key 
xTo.)  §  135;   Cent.  Dig.  §§  3', 5-319. 

3  2  Steelman  v.  Atchley  (Ark.)  135  S.  W.  902,  32  L.  R.  A.  (N.  S.) 
1060;  Citizens'  Bank  of  Greenville  v.  Kretschmar,  91  Miss.  608,  44 
South.  930;  In  re  Receiver  of  Middle  District  Bank,  1  Paige  (N. 
Y.)  585,  19  Am.  Dec.  452;  Smith  v.  Mosby,  9  Heisk.  (Tenn.)  501; 
post,  p.  424.  See  ''Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  135; 
Cent.  Dig.  §§  375-379. 

33  Dyer  v.  Sebrell,  135  Cal.  597,  67  Pac.  1036:  Colt  v.  Brown,  12 
Gray  (Mass.)  233.  See  ''Banks  and  Banking."  Dec.  Dig.  (Key  No.) 
§  135;    Cent.  Dig.  §§  375-379.  84  Ante,  p.  61. 

Tiff.Bks.(S:  B.— 23 


354  INSOLVENCY  (Ch.  11 

WRONGFUL  RECEIPT  OF  DEPOSIT— FOLLOW- 
ING TRUST  FUND— PREFERENCE 

92.  Where  a  bank  receives  a  deposit  knowing  that  it  has 
no  right  to  receive  it,  so  that  it  becomes  a  con- 
structive trustee  of  the  deposit,  the  depositor  is  en- 
titled to  recover  the  deposit,  in  preference  to  the 
general  creditors,  if  he  can  trace  it  and  identify  it, 
in  the  hands  of  the  receiver  or  assignee  for  the 
benefit  of  creditors  of  the  insolvent  bank,  either 
specifically,  or  in  the  form  of  other  specific  prop- 
erty into  which  it  has  been  converted,  or  as  form- 
ing part  of  a  fund  for  distribution  among  the  credi- 
tors, which  is  larger  than  it  would  have  been  but 
for  the  bank's  misappropriation.  Unless  the  de- 
positor can  so  trace  and  identify  the  deposit,  by 
weight  of  authority,  he  can  only  come  in  with  the 
general  creditors ;  but  some  courts  hold  that  the 
depositor  is  entitled  to  a  preference  if  he  can  show 
that  the  bank  received  the  benefit  of  the  deposit, 
although  he  fails  so  to  trace  and  identify  it. 

Although  the  relation  between  a  bank  and  its  depositor  is 
ordinarily  that  of  debtor  and  creditor,  in  certain  cases,  where 
a  bank  receives  a  deposit  knowing  that  it  has  no  right  to 
receive  it,  it  holds  the  money  deposited  as  a  constructive  trus- 
tee as  where  it  receives  the  deposit  w-ith  knowledge  of  its 
insolvency,^ ^  or  with  knowledge  that  the  deposit  is  made  in 
violation  of  a  trust.^®  In  such  cases  the  question  arises, 
upon  the  bank's  insolvency,  whether  the  depositor  or  other 
person  entitled  to  enforce  the  trust  must  come  in  with  the 
general  creditors  or  is  entitled  to  a  preference. 

If  the  deposit  is  of  money  which  has  been  mingled  with  the 
bank's  funds,  or  of  paper  the  proceeds  of  which  has  been 
collected  and  so  mingled,  the  depositor  could,  of  course,  re- 

35  Ante,  p.  349.  se  Ante,  p.  44. 


§    92)  WRONGFUL    RECEIPT   OF    DEPOSIT  35JJ 

claim  the  money  if  he  could  identify  the  particular  coins  or 
bank  notes  which  had  come  into  the  fund;  and  if  his  money 
or  property  had  been  used  to  buy  other  property,^Jns  equity 
would  attach  to  that  property  in  the  hands  of  the  receiver 
or  assignee.  Usually  this  is  impossible,  because  the  money 
of  the  depositor  has  been  mixed  with  the  bank's  funds  and  the 
identity  of  the  particular  coins  or  notes  has  been  lost.  Never- 
theless it  is  held  to-day  that  the  confusion  does  not  destroy 
the  equity  entirely.  "Formerly  the  equitable  right  of  fol- 
lowing misapplied  money  or  other  property  into  the  hands  of 
the  parties  receiving  it  depended  upon  the  ability  of  identify- 
ing it;  the  equity  attaching  only  to  the  very  property  misap- 
plied. This  right  was  first  extended  to  the  proceeds  of  the 
property,  namely,  to  that  which  was  procured  in  place  of  it 
by  exchange,  purchase,  or  sale.  But  if  it  became  confused 
with  other  property  of  the  same  kind.,  so  as  not  to  be  distin- 
guishable, without  any  fault  on  the  part  of  the  possessor,  the 
equity  was  lost.  Finally,  however,  it  has  been  held  as  the 
better  doctrine  that  confusion  does  not  destroy  the  equity  en- 
tirely, but  converts  it  into  a  charge  upon  the  entire  mass, 
giving  to  the  party  injured  by  the  unlawful  diversion  a  priority 
of  right  over  the  other  creditors  of  the  possessor."  ^^  If, 
therefore,  it  can  be  shown  that  the  money  deposited  or  collected 
was  in  the  bank  when  it  stopped  business,  so  that  it  constitutes 
a  part  of  the  common  mass  in  the  hands  of  the  receiver  or  as- 
signee, although  it  may  not  be  possible  to  ascertain  the  identical 
coins  or  notes,  the  identification  of  the  money  as  part  of  the 
common  mass  is  sufficient, >  and  the  depositor  may  take  out 
of  the  common  mass  as  much  as  he  put  in,  or,  in  other  words, 
he  is  entitled  to  a  preference  over  the  other  creditors. ^^ 

3  7  Frelinghuysen  v.  Nusent  (C.  C.)  .30  Fed.  229.  See,  also,  Peters 
V.  Bain,  133  U-  S.  670,  10  Sup.  Ct.  3.'54,  33  L.  Ed.  696.  /See  ''Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  75;   Cent.  Dig.  §  137. 

3  8  Wasson  v.  ITawkius  (C.  C.)  ."9  Fed.  233:  Lake  Erie  &  W.  R. 
Co.  V.  Indianapolis  Nat.  Bank  (C.  C.)  G.j  Fed.  691;  Qniu  v.  Earle 
(C.  C.)  95  Fed.  72S. 

If  collected  by  the  receiver,  the  depositor  may  recover  the  pro- 


356  INSOLVENCY  (Ch.  11 

This  state  of  affairs  arises  where  the  deposit  is  received 
immediately  before  the  bank  closes  its  doOrs,  so  that  the 
identical  money  is  among  the  assets  turned  over  to  the  receiver. 
It  may  be,  however,  that  the  bank  continues  to  do  busines: 
for  a  time  before  it  goes  into  the  hands  of  the  receiver,  and 
in  the  meantime  continues  to  receive  and  pay  out  money.  In 
this  case  it  is  generally  held  that  the  right  of  the  depositor 
to  be  paid  in  preference  to  the  general  creditors  depends  upon 
the  amount  of  money  continuously  in  the  bank  from  the  time 
of  the  bank's  wrongful  receipt  of  the  deposit.^"  When  the 
money  of  the  depositor  is  mixed  with  the  other  money  of  the 
bank,  he  becomes  cestui  que  trust  of  that  proportion  of  all 
the  money  in  the  bank  which  the  amount  of  his  deposit  bears 
to  the  total  amount,  or  he  may  claim  a  lien  to  the  amount  of 
all  his  deposit  upon  all  the  money  in  the  bank,  so  that,  if  the 
total  amount  in  the  bank  remains  continuously  equal  to  or  more 

ceeds  from  him.  Richardson  v.  Olivier,  105  Fed.  277,  44  C.  C.  A. 
468.  53  L.  R.  A.  113.  See  ''Banks  and  Banking,"  Dec.  Dip.  {Ecu 
yo.)  §  80;   Cent.  Dig.  §§  189-191. 

39  Massey  v.  Fisher  (C.  C.)  62  Fed.  958;  Boone  County  Nat.  Bank 
V.  Latimer  (C.  C.)  67  Fed.  27 ;  Richardson  v.  New  Orleans  Debenture 
Redemption  Co.,  102  Fed.  780,  42  C.  C.  A.  619,  52  L.  R.  A.  07; 
Richardson  v.  New  Orleans  Coffee  Co.,  102  Fed.  785,  43  C.  C.  A. 
583;  In  re  Swift  (D.  C.)  108  Fed.  212,  215;  Sherwood  v.  Central 
Michigan  Sav.  Bank,  103  :\Iich.  109,  61  N.  W.  352 ;  Wallace  v.  Stone, 
107  Mich.  190,  05  N.  W.  113;  Board  of  Fire  &  Water  Com'rs  of 
City  of  Marquette  v.  Wilkinson,  119  Mich.  655,  78  N.  W.  893,  44 
L.  R.  A.  493 ;  In  re  Holmes,  37  App.  Div.  15,  55  N.  Y.  Supp.  708, 
affirmed  159  N.  Y.  532,  53,  N.  E.  1120 ;  Blair  v.  Hill,  50  App.  Div. 
33,  63  N.  Y.  Supp.  670 ;  Orme  v.  Baker,  74  Ohio  St.  337,  78  JSI.  E. 
439,  113  Am.  St.  Rep.  968;  Continental  Nat.  Bank  v.  Weems.  69 
Tex.  489,  6  S.  W.  802,  5  Am.  St.  Rep.  85;  State  v.  Foster,  5  Wyo. 
199,  38  Pac.  926,  29  L.  R.  A.  226,  03  Am.  St.  Rep.  47.  See,  also, 
Cleveland,  C,  C.  &  St.  L.  Ry.  v.  Hawkms  (C.  C.)  79  Fed.  29;  Mer- 
chants' Nat.  Bank  v.  School  Dist.  No.  8,  94  Fed.  705,  36  C.  C.  A. 
432;  Western  German  Bank  v.  Norvell,  134  Fed.  724,  69  C.  C.  A. 
330;  Butler  v.  Western  German  Bank,  159  Fed.  116,  86  C.  C.  A. 
306 ;  Woodhouse  v.  Crandall,  197  111.  104,  64  N.  E.  292,  58  L.  R.  A. 
385 ;  Bishop  v.  Mahoney,  70  Minn.  238,  73  N.  W.  6 ;  City  of  Lincoln 
V.  Morrison,  64  Neb.  822.  90  N.  V\'.  905,  57  L.  R.  A.  885 ;    Willoughby 


§    92)  WRONGFUL    RECEIPT   OF    DEPOSIT  357 

than  the  amount  of  his  deposit,  he  must  be  paid  in  full,  while 
if  at  any  time  the  total  amount  falls  below  the  amount  of 
his  deposit  his  security  is  reduced  pro  tanto,  and  will  not  be 
increased  by  subsequent  deposits  in  the  bank.*"  The  rule  is 
the  same  as  that  applied  where  a  trustee  has  mingled  in  one 
bank  deposit  the  trust  money  and  money  of  his  own,  in  which 
case  the  cestui  que  trust  may  hold  the  depositor  as  a  trustee 
of  the  deposit  pro  tanto,  so  that,  if  the  deposit  remains  con- 
tinuously equal  to  the  portion  thereof  to  which  the  cestui  is 
equitably  entitled,  he  may  enforce  a  charge  upon  the  depos- 
itor's claim  against  the  bank,  as  against  the  general  credi- 
tors of  the  insolvent  trustee,  to  that  amount,  while  if  the  de- 
posit falls  below  that  amount  the  security  of  the  cestui  is  re- 
duced pro  tanto,* ^  and  will  not  be  increased  by  a  subsequent 
deposit  by  the  trustee  of  his  ow^n  money. ''^  The  rule  is  often 
said  to  be  based  on  a  presumption  that  the  trustee  first  drew 
his  own  money  out  of  the  mixed  fund,  leaving  the  trust  fund 
in  the  balance  on  hand  ;  but  this  is,  as  has  been  pointed  out, 
a  pure  fiction,  the  true  explanation  doubtless  being  that  the 
cestui  has  an  option  to  claim  either  his  proportion  of  the  fund, 
or  a  charge  upon  the  whole  to  the  amount  of  the  money  orig- 
inally held  in  trust  for  him.*^ 

V.  Weinberger,  15  Okl.  226,  79  Pac.  777;  Piano  Mfg.  Co.  v.  Auld. 
14  S.  D.  512.  89  N.  W.  21,  86  Am.  St.  Rep.  769.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  SO;   Cent.  Dig.  §§  'l84-'196. 

4  0  See  19  Harv.  Law  Rev.  511,  520,  "Following  Misappropriated 
Property  and  Its  Product,"  by  James  Barr  Ames. 

4  1  In  re  Hallett,  13  Ch.  D.  696;  Spokane  County  v.  First  Nat. 
Bank,  68  Fed.  979,  981,  16  C.  C.  A.  81;  In  re  Swift  (D.  C.)  108 
Fed.  212;  In  re  Mulligan  (D.  C.)  116  Fed.  715,  717;  Greene's  Es- 
tate (Sur.)  20  N.  Y.  Supp.  94.  See,  also,  Elizalde  v.  Elizalde,  137 
Cal.  634,  66  Pac.  369.  70  Pac.  861,  Ellicott  v.  Kuhl,  60  N.  J.  Eq. 
333,  40  Atl.  946;  Importers'  &  Traders'  Nat.  Bank  v.  Peters,  123 
N.  Y.  272,  25  N.  E.  319.  See  "Tru.^ts,"  Dec.  Dig.  (Key  No.)  §§  356- 
358;    Cent.  Dig.  §§  52.9-.538. 

4  2  Mercantile  Trust  Co.  v.  St.  Louis  &  S.  F.  Ry.  Co.  (C.  C.)  99 
Fed.  485;  Cole  v.  Cole,  54  App.  Div.  37,  66  N.  Y.  Supp.  314.  See 
"Trusts;'  Dec.  Dig.   {Key  No.)  §§  356-358;    Cent.  Dig.  §§  529-558. 

4  3  19  Harv.  Law  Rev.  511,  518. 


358  INSOLVENCY  (Ch.  11 

In  the  cases  referred  to  in  the  preceding  paragraph,  the 
depositor  is  entitled  to  a  preference  over  the  other  creditors, 
because  his  money  is  traceable  into  the  fund  which  is  in  the 
receiver's  hands  for  distribution  among  the  general  creditors, 
and  which  is  consequently  larger  than  it  would  have  been  but 
for  the  bank's  misappropriation  of  the  depositor's  money.  The 
right  to  follow  the  trust  moneys  into  other  property  has  its 
basis  in  the  right  of  property,  not  upon  any  theory  of  prefer- 
ence by  reason  of  an  unlawful  conversion.  If  the  money  is 
not  traceable  into  such  fund,  or  into  specific  property,  which 
is  in  the  hands  of  the  receiver,  the  depositor  must  come  in 
with  the  general  creditors.  If  the  trust  fund  has  been  dissi- 
pated by  the  trustee,  and  is  neither  specifically  in  the  hands 
of  the  receiver  or  assignee,  nor  represented  by  other  property 
into  which  it  has  been  converted,  there  can  be  no  preference. 
Such  is  the  rule  which  prevails  in  nearly  all  jurisdictions.** 

4  4  Multnomah  County  v.  Oregon  Nat.  Bank  (C.  C.)  61  Fed.  912 
(disapproving  Sandiego  'County  v.  California  Nat.  Bank  (C.  C.)  52 
Fed.  59) ;  City  Bank  of  HopkiHSville  v.  Blackmore,  75  Fed.  771.  21  C. 
C.  A.  514;  Beard  v.  Independent  Dist.  of  Pella  City,  88  Fed.  375,  31 
C.  C.  A.  562;  St.  Louis  Brewing  Ass'n  v.  Austin,  100  Ala.  §13,  13 
South.  908 ;  Hill  v.  INIiles,  83  Ark.  4SG.  104  S.  W.  198 ;  Lanterman  v. 
Travous,  174  111.  459,  51  N.  E.  805 ;  New  Farmers'  Bank's  Trustee 
V.  Cockrell,  106  Ky.  578,  51  S.  W.  2;  Italian  Fruit  &  Importing 
Co.  V.  Penniman,  100  Md.  698,^1  Atl.  694,  1  L.  R.  A._(N.  S.)  252; 
Sunderlin  v.  Mecosta  County  Sav.  Bank,  116  Slich.  281,  74  N.  W. 
478 ;  Board  of  Fire  &  Water  Com'rs  of  City  of  Marquette  v.  Wilkin- 
son, 119  Mich.  655.  78  N.  W.  893,  44  L.  R.  A.  493 ;  Twohy  Mercantile 
Co.  V.  Melbye,  78  Minn.  357,  81  N.  W.  20;  Shields  v.  Thomas,  71 
]Miss.  260,  14  South.  84,  42  Am.  St.  Rep.  4.58;  City  of  Lincoln  v. 
Morrison,  64  Neb.  822,  90  N.  W.  905.  57  L.  R.  A.  885  (overruling 
earlier  cases);  Gavin  v.  Gleason,  105  N.  Y.  256,  11  N.  E.  504;  At- 
kinson v.  Rochester  Printing  Co.,  114  N.  Y.  168,  21  N.  E.  178; 
Willoughby  v.  Weinberger,  15  Okl.  226,  79  Pac.  777;  Freiberg  v. 
Stoddard,  161  Pa.  2.59,  28  Atl.  1111;  Nonotuck  Silk  Co.  v.  Flanders, 
87  Wis.  237,  58  N.  W.  383  (overruling  McLeod  v.  Evans,  66  Wis.  401, 
28  N.  W.  173,  214,  57  Am.  Rep.  287.  and  other  case?) ;  Thuemmler  v. 
Barth,  89  Wis.  381,  62  N.  W.  94;  Burnham  v.  Barlh.  89  Wis.  362.  62 
N.  W.  96;    Dowie  v.  Humphrey,  91  Wis.  98.  64  N.  W.  315;    State 


§   92)  WRONGFUL    RMCEIPT    OF    DEPOSIT  359 

In  a  few  jurisdictions  it  has  been  held  that  it  is  not  necessary 
to  trace  the  trust  money  into  the  hands  of  the  receiver  or 
assignee,  or  to  prove  that  the  fund  for  distribution  among  the 
'creditors  is  larger  than  it  would  have  been  but  for  the  bank's 
misappropriation,  and  that  it  is  enough  to  show  that  the  money 
went  into  the  estate  of  the  bank;  but  even  in  these  jurisdic- 
tions the  tendency  of  many  of  the  later  decisions  has  been  to 
qualify  or  to  overrule  this  doctrine.''^ 

V.  Foster,  5  Wyo.  190,  38  Pac.  926.  29  L.  R.  A.  220,  63  Am.  St.  Rei). 
47;    Blake  v.  State  Sav.  Bank.  ]2  Wash.  619,  41  Pac.  909. 

Where  one  deposits  in  a  banli  the  check  of  another  depositor,  and 
is  given  credit,  the  assets  of  the  bank  are  not  thereby  increased, 
and  hence  there  can  be  no  tracing  and  reclaiming  of  the  deposit 
on  the  bank's  insolvency.  Perth  Amboy  Gaslight  Co.  v.  Middlesex 
County  Bank,  60  N.  J.  Eq.  84.  45  Atl.  704.  See  "Trusts;'  Dec.  Dig. 
(Key  No.)  §§,  356-858;   Cent.  Dig.  §§  529-550. 

4  5  First  Nat.  Bank  of  Central  City  v.  Hummell,  14  Colo.  259,  23 
Pac.  986,  8  L.  R.  A.  788,  20  Am.  St.  Rep.  257 ;  Independent  District 
of  Boyer  v.  King,  80  Iowa,  497,  45  N.  W.  908;  Davenport  Plow 
Co.  V.  Lamp,  80  Iowa,  722,  45  N.  W.  1049,  20  Am.  St.  Rep.  442  (but 
see  District  Tp.  of  Eureka  v.  Farmers'  Bank  of  Fontanelle,  88  Iowa, 
194,  55  N.  W.  342 ;  Bradley  v.  Chesebrough,  111  Iowa.  126,  82  N.  W. 
472;  Sioux  City  Stockyards  Co.  v.  Fribourg,  121  Iowa,  230,  96 
N.  W.  747 ;  Whitcomb  v.  Carpenter.  134  Iowa,  227,  111  N.  W.  825,  10 
L.  R.  A.  [N.  S.]  928 ;  Hanson  v.  Roush,  139  Iowa,  58,  116  N.  W.  1061 ; 
Stilson  V.  First  State  Bank  of  Corwith,  149  Iowa,  662,  129  N.  W.  70) ; 
Peak  V.  Ellicott,  30  Kan.  156,  1  Pac.  499,  46  Am.  Rep.  90 ;  Reeves  v. 
Pierce,  64  Kan.  502,  07  Pac.  1108  (cf.  Myers  v.  Board  of  Education, 
51  Kan.  87,  32  Pac.  658,  37  Am.  St.  Rep.  263) ;  Harrison  v.  Smith, 
83  Mo.  210,  53  Am.  Rep.  571;  Stoller  v.  Coates,  88  Mo.  514;  Tier- 
man's  Ex'r  V.  Security  Building  &  Loan  Ass'n,  152  Mo.  135,  53  S.  W. 
1072  (but  see  Bircher  v.  W^alther,  163  Mo.  461,  63  S.  W.  691)  ;  State  v. 
State  Bank  of  Wahoo,  42  Neb.  896,  61  N.  W.  252;  State  v.  Midland 
State  Bank,  52  Neb.  1,  71  N.  W.  1011,  66  Am.  St.  Rep.  484 ;  (but  see 
City  of  Lincoln  v.  Morrison,  64  Neb.  822,  90  N.  W.  905,  57  L.  R.  A. 
885).  See,  also,  Shopert  v.  Indiana  Nat.  Bank,  41  Ind.  App.  474,  83 
N.  E.  515.  See  "Banlcs  and  Banking,"  Dec.  Dig.  (Key  No.)  §  75; 
Cent.  Dig.  §§  157,  1116. 


360  NATIONAL  ^ANKS  (Ch.  12 

CHAPTER  XII 

NATIONAL  BANKS 

{>3.  Tn  General. 

94.  Formation. 

95.  Capital  Stock — Amount 

96.  Transfer  of  Shares. 

97.  Lien  on  Shares. 

98.  Rights  of  Stockholders. 

99.  Dividends. 

100.  Liability  of  Stockholders  for  Debts  of  Bank. 

101.  Who  are  Liable  as  Shareholders. 

102.  Enforcement  of  Shareholders'  Liability. 

103.  Officers — In  General. 

104.  Civil  Liability  of  Officers— At  Common  Lavr. 

105.  Statutory  Liability. 

106.  Criminal  Liability  of  Officers. 

107.  Forfeiture  and  Dissolution. 

108.  Voluntary  Liquidation. 

109.  Involuntary  Liquidation. 

110.  Transfers  and  Payments  Affected  by  Insolvency— Preferences. 

111.  Attachments,  Injunctions,  and  Executions. 

112.  Actions  by  and  Against  National  Banks. 

113.  Taxation  by  States. 

IN  GENERAL 

93.  National  banking  associations  are  corporations  formed 
under  the  provisions  of  the  National  Bank  Act. 
They  are  governmental  instruments,  and  the  states 
can  exercise  no  control  over  them,  except  so  far 
as  Congress  may  permit ;  but,  in  general,  their  con- 
tracts, their  rights  of  property,  and  their  right  to 
collect  and  their  liability  to  be  sued  for  their  debts 
are  governed  by  the  state  laws. 

Scope  of  Chapter 

Many    questions    relating   to   national   banks,    as    well    as 
many  of  the  provisions  of  the  Xational  Bank  Act.  are  dealt 


§    93)  IN    GENERAL  3G1 

with  in  other  chapters.  In  this  chapter  it  is  proposed  to  take 
up  such  of  the  remaining  provisions  of  the  act  and  matters 
relating  to  national  banks  as  are  deemed  to  be  within  the 
scope  of  the  book. 

National  Banks — In  General 

While  the  federal  constitution  does  not  expressly  grant  to 
Congress  the  power  to  create  corporations,  it  grants  the  power 
by  implication,  as  declared  by  Chief  Justice  Marshall,  when- 
ever the  creation  of  a  corporation  is  an  appropriate  measure 
to  execute  the  powers  conferred,  and  under  this  implied  grant 
Congress  has  power  to  incorporate  a  bank.^  Under  this  power 
Congress  has  enacted  the  act  entitled  "An  act  to  provide  a 
national  currency  secured!  by  a  pledge  of  United  States  bonds, 
and  to  provide  for  the  circulation  and  redemption  thereof," 
to  be  known  as  the  National  Bank  Act.^  The  constitutionality 
of  the  act  "rests  upon  the  same  principle  as  the  act  creating 
the  second  Bank  of  the  United  States.  *  *  *  The  national 
banks  organized  under  the  act  are  instruments  designed  to 
be  used  to  aid  the  government  in  the  administration  of  an  im- 
portant branch  of  the  public  service.  They  are  means  aj)- 
propriate  to  that  end.  Of  the  degree  and  necessity  which 
existed  for  creating  them  Congress  is  the  sole  judge."  ^  It 
has  been  pointed  out  that  the  act  may  fall  within  the  power  of 
Congress  to  borrow  money,  to  regulate  interstate  commerce, 
or  to  coin  money  and  to  regulate  the  value  thereof.* 

The  national  banking  system  owes  its  existence  to  the  Civil 

1  McCulloch  V.  Maryland,  4  Wlieat.  316,  4  L.  Ed.  579 ;  Osborn  v. 
Bank  of  United  States,  9  Wheat.  73S,  6  L.  Ed.  204.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  233;    Cent.  Dig.  §  879. 

2  See  Rev.  St.  U.  S.  §  5133  (Act  June  20,  1874,  c.  343,  §  1,  IS  Stat. 
123  [U.  S.  Comp.  St.  1901,  p.  3454]). 

3  Farmers'  &  Mechanics'  Nat.  Bank  v.  Bearing,  91  U.  S.  29,  23  L.  Ed. 
196.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  283;  Cent. 
Dig.  §§  879-888. 

4  Thompson,  Corp.  (2d  Ed.)  §  126. 

National  banks  "were  established  for  the  purpose,  in  part,  of  pro- 
viding a  currency  for  the  whole  country,  and  in  part  to  create  a  mar- 


362  NATIONAL  BANKS  (Ch.  12 

War  and  to  the  necessity  of  finding-  a  market  for  United  States 
bonds.  The  first  act  providing  for  a  system  of  national  banks 
was  passed  February  25,  1863 ;  but  it  proved  unsatisfactory, 
and  the  act  of  June  3,  1864,  making  important  changes,  was 
substituted,  under  which  banks  chartered  by  the  states  could 
be  reorganized  as  national  banks.  The  reorganization  of  state 
banks  was  stimulated  by  an  act  laying  a  tax  of  10  per  cent,  on 
all  bank  notes  of  state  banks  and  others  paid  out  by  them  after 
July  1,  1866.^  The  right  of  Congress  to  restrain  the  circulation 
of  any  notes  not  issued  under  its  own  authority  was  sustained 
upon  the  ground  that  Congress,  having  undertaken,  in  the  ex- 
ercise of  constitutional  power,  to  provide  a  currency  for  the 
whole  country,  may  constitutionally  secure  the  benefit  of  it  to 
the  people  by  appropriate  legislation." 

Power  of  States 

The  national  banks  having  been  brought  into  existence  by 
Congress  as  governmental  institutions,  the  states  can  exercise 
no  control  over  them,  nor  in  any  way  affect  their  operation, 
except  so  far  as  Congress  may  see  proper  to  permit.''     As  we 

ket  for  the  loans  of  the  general  government."  Tiffany  v.  National 
Bank  of  Missouri,  IS  Wall.  409,  21  L.  Ed.  862. 

As  to  the  power  of  Congress  to  provide  a  currency  for  the  coun- 
try, see  Yeazie  Bank  v.  Fenuo,  8  Wall.  533,  19  L.  Ed.  4S2.  Sec 
•'Banks  and  Banking;'  Dec.  Dig.  {Key  Xo.)  §  233j  Cent.  Dig.  §§  879- 
888. 

5 Rev.  St.  U.  S.  §  3412.  This  is  superseded  by  Act  Feb.  8,  1875, 
c.  36,  18  Stat.  311  (U.  S.  Comp.  St.  1901,  p.  2249). 

For  a  history  of  the  legislation,  see  Veazie  Bank  v.  Fenno,  8  Wall. 
533,  19  L.  Ed.  482 ;    Dunbar,  Theory  &  Hist,  of  Banking,  132  et  seq. 

6  Veazie  Bank  v.  Fenno,  8  Wall.  533,  19  L.  Ed.  4S2.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  233;    Cent.  Dig.  §§  879-888. 

-  Farmers'  &  Mechanics'  Nat.  Bank  v.  Bearing,  91  U.  S.  29,  23 
L.  Ed.  190.  See,  also,  Davis  v.  Elmira  Sav.  Bank,  161  U.  S.  275,  16 
Sup.  Ct.  502,  40  L.  Ed.  700. 

The  bank  depositors'  guaranty  act  of  Kansas,  which  authorizes 
banks  incorporated  under  the  laws  of  the  state  and  possessing  pre- 
scribed qualifications  to  join  in  contributing  to  and  maintaining  a 
fund  for  securing  certain  classes  of  their  depositors  against  loss  in 


§    93)  IX    GENEKAL  '  3G3 

liave  seen,  the  provisions  of  the  act  relating  to  interest  charge- 
able by  the  banks  supersede  the  state  laws  on  the  subject  of 
usury.^  So  a  state  law  attempting  to  prohibit  national  banks 
from  receiving  deposits  when  insolvent  and  prescflWng  a  pen- 
alty is  invalid  as  an  attempt  to  control  and  regulate  the  powers 
of  national  banks.®  "Undoubtedly  a  state  has  the  legitimate 
power  to  define  and  punish  crimes  by  general  laws  applicable 
to  all  persons  within  its  jurisdiction. ^°  So,  likewise,  it  may 
declare,  by  special  laws,  certain  acts  to  be  criminal  offenses 
when  committed  by  officers  or  agents  of  its  own  banks  or  in- 
stitutions. But  it  is  without  lawful  power  to  make  such  special 
acts  applicable  to  banks  organized  and  operating  under  the 
laws  of  the  United  States."  ^^ 

Of  course,  national  banks  are  not  wholly  withdrawn  from  the 
operation  of  state  legislation.  "They  are  subject  to  the  laws 
of  the  state,  and  are  governed  in  their  daily  course  of  business 
far  more  by  the  laws  of  the  state  than  of  the  nation.    All  their 

case  of  the  insolvency  of  any  of  their  number,  is  not  unconstitutional 
as  denying  to  the  national  hanks  within  the  state  the  equal  protection 
of  the  law.  Nor  is  such  act  unconstitutional  on  the  ground  that  its 
effect  may  be  to  attract  depositors  from  the  national  to  the  guai*- 
anteed  banks,  and  thus  increase  competition  with  the  national  banks, 
and  impair  their  efficiency  as  instrumentalities  of  the  national  gov- 
ernment. Dolley  v.  Abilene  Nat.  Bank  of  Abiiene,  Kan..  179  Fed. 
461.  102  C.  C.  A.  607,  32  L.  R.  A.  (X.  S.)  1065.  See,  also.  Noble  State 
Bank  v.  Haskell,  219  U.  S.  104.  31  Sup.  Ct.  1S6,  55  L.  Ed.  112.  32  L. 
R.  A.  (N.  S.)  1062;  Schallenberger  v.  First  State  Bank  of  Ilolstein, 
Neb.,  219  U.  S.  114,  31  Sup.  Ct.  189,  55  L.  Ed.  117.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  .Yo.)  §  233;   Cent.  Dig.  §  880. 

8  Ante,  p.  239. 

9  Eastpn  V.  Iowa,  188  U.  S.  220,  23  Sup.  Ct.  288.  47  L.  Ed.  452.  See 
'•Banks  and  Banking,"  Dec.  Dig.  (Keg  No.)  §  233;    Cent.  Dig.  §  880. 

10  See  Cross  v.  North  Carolina,  132  U.  S.  131,  10  Sup.  Ct.  47,  .33 
L.  Ed.  287 ;  State  v.  First  Nat.  Bank.  2  S.  D.  508,  51  N.  W.  587.  -^ee 
"Banks  and  Banking,"  Dec.  Dig.  (Key  .Yo.)  §  233;    Cent.  Dig.  §  880. 

11  Easton  v.  Iowa.  188  U.  S.  220.  23  Sup.  Ct.  288.  47  L.  Ed.  452. 
See  "Banks  and  Bunking,"  Dec.  Dig.  {Key  Yo.)  §  233;  Cent.  Dig.  § 
880. 


364  NATIONAL  BANKS  (Ch.  12 

contracts  are  governed  and  construed  by  state  laws.  Their  ac- 
quisition and  transfer  of  property,  their  right  to  collect  their 
debts,  and  their  liability  to  be  sued  for  debts,  are  all  based  on 
state  law.  It  is  only  when  the  state  law  incapacitates  the  banks 
from  discharging  their  duties  to  the  government  that  it  becomes 
unconstitutional."  ^-  Thus  a  state  statute  requiring  the  cash- 
iers of  national  banks,  under  penalty,  to  transmit  to  the  clerks 
of  the  towns  in  which  shareholders  may  reside  a  list  of  such 
stockholders,  is  valid. ^^  It  has  been  held  that  it  is  not  com- 
petent for  state  legislation  to  limit  or  interfere  with  the  trans- 
ferable quality  of  national  bank  stock,  as  left  by  the  federal 
statutes.^* 

FORMATION 

94.  A  national  banking  association  may  be  formed  by  any 
number  of  persons,  not  less  than  five,  who  shall  en- 
ter into  articles  of  association,  make  an  organiza- 
tion certificate,  and  comply  virith  the  other  formal- 
ities prescribed.  A  state  bank  may  become  a  na- 
tional banking  association  by  complying  with  the 
requirements  of  the  act,  without  loss  of  its  iden- 
tity. 

In  General 

The  National  Bank  Act  provides  that  associations  for  carry- 
ing on  the  business  of  banking  may  be  formed  by  any  number 

12  First  Nat.  Bank  v.  Kentucky,  9  Wall.  353,  19  L.  Ed.  701.  See, 
also,  McClellan  v.  CMpman,  164  U.  S.  347,  17  Sup.  Ct.  85,  41  L.  Ed. 
4G1 ;  Merchants'  Nat.  Bank  v.  Ford,  124  Ky.  403,  99  S.  W.  260 ;  Haw- 
ley  V.  Hurd,  72  Vt.  122,  47  Atl.  407,  52  L.  R.  A.  195,  82  Am.  St.  Rep. 
922.  See  ''Banks  and  Banlcinrj"  Dec.  Dig.  {Key  Nq.)  §  233;  Cent. 
Dig.  §  880. 

13  Waite  V.  Dowley,  94  U.  S.  527,  24  L.  Ed.  181;  post,  p.  435.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  233;   Cent.  Dig.  §  880. 

1*  Doty  V.  First  Nat.  Bank,  3  N.  D.  9,  53  N.  W.  77,  17  L.  R.  A.  259. 
See,  also,  Scott  v.  Pequonnock  Nat.  Bank,  35  Fed.  494 ;  Bradeu's 
Estate,  165  Pa.  184,  30  Atl.  746.  See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  233;   Cent.  Dig.  §  880. 


§  94)  FORMATION  365 

of  natural  persons,  not  less  than  five,  who  shall  enter  into 
articles  of  association  and  make  an  organization  certificate,  in 
form  as  prescribed,  both  of  which  shall  be  forwar^^  to  the 
comptroller  of  the  currency,  who  shall  preserve  them  in  his 
office.  ^°  The  association  thereupon  becomes  a  body  corporate 
with  the  powers  enumerated,  but  it  is  not  authorized  to  transact 
any  business,  except  such  as  is  incidental  and  preliminary  to 
its  organization,  until  it  has  been  authorized  by  the  comptroller 
to  begin  the  business  of  banking.^*'  At  least  50  per  cent,  of  the 
capital  stock  must  be  paid  in  before  the  association  may  be 
authorized  to  commence  business. ^'^  When  the  certificate  is 
transmitted,  the  comptroller  is  required  to  ascertain  whether* 
the  association  has  complied  with  the  requirements  of  the  act, 
and  upon  being  satisfied  thereof  shall  issue  a  certificate  that, 
the  association  has  so  complied  and  is  authorized  to  commence 
the  business  of  banking,  and  the  association  shall  cause  the 
certificate  to  be  published."  The  comptroller  has  jurisdiction 
to  determine  as  to  the  completeness  of  the  organization,  and) 
his  certificate  is  not  open  to  collateral  attack,  and  is  conclusive 
for  purposes  of  litigation.^" 

15  Rev.  St.  U.  S.  §§  5133-.513.J  (U.  S.  Comp.  St.  1901,  pp.  3454,  3455). 
For  change  of  name  or  location,  see  Act  May  1,  188G,  c.  73,  §§  2-4, 
24  Stat.  18  (U.  S.  Comp.  St.  1901,  p.  3456) ;  ante,  p.  270. 

16  Rev.  St.  U.  S.  §  5136  (U.  S.  Comp.  St.  1901,  p.  3455). 

A  lease  by  a  bank,  before  receiving  such  authorization,  of  a  bank 
building,  is  ultra  vires,  and  will  not  support  an  action  for  rent,  or  for 
anything  beyond  the  value  of  what  the  bank  actually  received  and 
enjoyed.  McCormick  v.  Market  Nat.  Bank,  165  U.  S.  538,  IT  Sup.  Ct. 
433,  41  L.  Ed.  817.  See  "Banks  and  Bank  in  g;'  Dec.  Dig.  (Key  No.) 
§  259;  Cent.  Dig.  §§  S.S.),  906. 

17  Rev.  St.  U.  S.  §  5140  (U.  S.  Comp.  St.  1901,  p.  3401). 

18  Rev.  St.  U.  S.  §§  5168-5170  (U.  S.  Comp.  St.  1901,  p.  3474). 

13  Casey  v.  Galli,  94  U.  S.  673,  24  L.  Ed.  168.  See,  ?ilso.  Mix  v. 
National  Bank  of  Bloomington,  91  111.  20.  33  Am.  Rep.  44 ;  Washing- 
ton County  Nat.  Bank  v.  Lee,  112  Mass.  521 ;  Citizens'  Nat.  Bank  v. 
Great  Western  Elevator  Co.,  13  S.  D.  1,  82  N.  W.  186 ;  National  Bank 
of  Commerce  v.  Galland,  14  Wash.  502,  45  Pac.  35. 

A  certificate  under  the  seal  of  the  office  of  the  comptroller,  given 


366  NATIONAL  BANKS  (Ch.  12 

Organica{ion  of  State  Banks  as  National  Banks 

Any  state  bank,  whether  incorporated  under  a  special  or  a 
general  law,  may  become  a  national  association,  in  the  manner 
prescribed  by  the  National  Bank  Act.  In  such  case  the  articles 
of  association  and  the  organization  certificate  may  be  executed 
by  a  majority  of  the  directors,  who  thereafter  may  do  whatever 
is  necessary  to  perfect  the  organization,  and  the  certificate 
shall  declare  that  the  owners  of  two-thirds  of  the  capital  stock 
have  authorized  the  change.  The  shares  may  continue  for  the 
same  amount  as  before,  and  the  directors  may  continue  to  be 
such  until  others  are  elected  or  appointed.  When  the  comptrol- 
ler has  issued  a  certificate  that  the  provisions  of  law  have  been 
complied  with  and  that  the  association  is  authorized  to  com- 
mence the  business  of  banking,  its  organization  as  a  national 
bank  is  complete.^" 

No  authority  from  the  state  is  necessary  to  enable  a  state 
bank  to  become  a  national  bank.'^  The  change  of  a  state  bank 
into  a  national  bank  "does  not  destroy  its  identity  or  corporate 
existence,  but  simply  results  in  a  continuation  of-  the  same 
body,  with  the  same  officers  and  stockholders,  the  same  prop- 
erty, assets,  and  banking  business,  under  a  changed  jurisdic- 
tion." 2^     The  obligations  of  the  old  bank  continue  binding 

by  a  deputy  as  "acting"  comptroller,  is  sufficient.  Keyser  v.  Hitz,  13o 
U.  S.  138,  10  Sup.  Ct.  290,  33  L.  Ed.  .531.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  236;  Ctnt.  Dig.  §§  8SS-892. 

20  Rev.  St.  U.  S.  §  5154  (U.  S.  Comp.  St.  1901,  p.  3466). 

The  comptroller's  certificate  is  conclusive.  Casey  v.  Galli,  94  U.  S. 
673,  24  L.  Ed.  168. 

A  savings  bank  organized  in  the  District  of  Columbia  may  be- 
come a  national  bank.  Keyser  v.  Hitz,  133  U.  S.  138,  10  Sup.  Ct. 
290,  33  L.  Ed.  531.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  237;  Cent.  Dig.  §§  89J,-S97. 

21  Casey  v.  Galli,  94  U.  S.  673,  24  L.  Ed.  108.  Cf.  State  v.  Na- 
tional Bank  of  Baltimore,  33  Md.  75;  Thomas  v.  President,  etc.,  of 
Farmers'  Bank  of  Maryland,  46  Md.  43.  See  "Banks  and  Banking," 
Dec.  Dig.  {Key  No.)  §  237;  Cent.  Dig.  §§  89.^897. 

22  Metropolitan  Nat.  Bank  v.  Claggett,  141  U.  S.  520.  12  Sup.  Ct. 
60,   35  L.   Ed.   841.     See,   also,   City   Nat.   Bank  of  Poughkeepsie   v. 


§    94)  FORMATION  3G7 

upon  the  new,^^  and  the  new  bank  succeeds  to  the  right  to 
enforce  all  demands  existing  in  favor  of  the  old.-*  Converse- 
ly, state  statutes  sometimes  make  provision  for  the  organiza- 
tion of  national  banks  into  state  banks ;  the  state  bank  re- 
taining the  identity  of  the  national  bank,  and  succeeding  to  its 
assets  and  liabilities.^'* 
Continuance  and  Bxfen^ion  of  Corporate  Existence 

A  national  bank,  upon  its  due  organization,  has  succession 
for  20  years,  unless  it  is  sooner  dissolved  according  to  the  pro- 
visions of  its  articles,  or  by  the  act  of  the  shareholders  owning 
two-thirds  of  its  stock,  or  unless  its  franchise  becomes  for- 
feited by  some  violation  of  law.-* 

A  later  act  ^'^  provides  that  any  association,  within  the  two 

Phelps,  97  N.  Y.  44,  49  Am.  Rep.  513 ;  People's  Nat.  Bank  v.  Board 
of  Coiu'rs  of  Kingfisher  County  (Okl.)  103  Pac.  CS2.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  257;  Cent.  Dig.  §§  89^-897. 

2  3  Coffey  V.  National  Bank  of  Missouri,  46  Mo.  140,  2  Am.  Rep. 
4S8;  Kelsey  v.  National  Bank  of  Crawford  County,  69  Pa.  426. 

The  conversion  of  a  state  bank  into  n  national  bank  is  not  a  "clos- 
ing of  its  business,"  within  the  meaning  of  the  New  York  statute  of 
1859  (Laws  1859,  c.  236),  providing  for  the  redemption  of  a  state 
bank's  circulation,  and  releasing  it  from  liability  on  such  notes  as 
are  not  presented  within  six  years  after  the  giving  of  the  prescribed 
notice,  and  any  notes  not  so  presented  constitute  a  valid  claim 
against  the  national  bank.  Metropolitan  Nat.  Bank  v.  Claggett. 
141  U.  S.  520,  12  Sup.  Ct.  60,  35  L.  Ed.  841.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  237;  Cent.  Dig.  §§  S9//-S97. 

2  4  Atlantic  Nat.  Bank  v.  Harris,  118  Mass.  147.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  237;  Cent.  Dig.  §§  89^-897. 

2  5  First  Commercial  Bank  of  Pontiac  v.  Talbert,  103  Mich.  625, 
61  N.  W.  888,  50  Am.  St.  Rep.  385.  See-"Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  2S2;  Cent.  Dig.  §  1080. 

2  6  Rev.  St.  U.  S.  §  5136  (U.  S.  Comp.  St.  1901,  p.  3455) ;  post,  p. 
410  et  seq. 

27  Act  July  12,  1882,  c.  290,  22  Stat.  162  (U.  S.  Comp.  St.  1901,  p. 
3457).  See,  also,  Act  April  12,  1902,  c.  503,  32  Stat.  102  (TJ.  S.  Comp. 
St.  Supp.  1909,  p.  1318). 

As  to  presumption  of  acceptance  of  benefit  of  certificate  of  comp- 
troller extending  corporate  existence.  Clement  v.  United  States,  149 
Fed.  305,  79  C.  C.  A.  243.  See  ''Banks  and  Banking"  Dec.  Dig.  (Key 
No.)  §  236;  Cent.  Dig.  §§  888,  889. 


368  NATIONAL  BANKS  (Ch.  12 

years  next  previous  to  the  date  of  the  expiration  of  its  corpo- 
rate existence,  with  the  consent  of  stockholders  owning  not 
less  than  two-thirds  of  the  capital  stock,  and  with  the 
approval  of  the  comptroller  of  the  currency,  may  ex- 
tend its  period  of  succession  by  amending  its  articles  for  a 
term  of  not  more  than  twenty  years.  A  shareholder  not  assent- 
ing may  withdraw  from  the  association  and  may  receive  the 
appraised  value  of  his  shares.^^  The  association  continues  to 
be  the  identical  association,  with  the  same  rights  and  liabil- 
ities. ^°  Associations  whose  corporate  existence  has  expired  or 
is  about  to  expire,  and  which  do  not  desire  to  extend  their  ex- 
istence must  take  the  steps  required  of  an  association  whose 
shareholders  vote  to  go  into  liquidation,  and  the  franchises 
cf  such  association  are  extended,  for  the  sole  purpose  of  liqui- 
dating their  affairs,  until  such  affairs  are  finally  closed.^ ° 


CAPITAL  STOCK— AMOUNT 

95.  The  amount  of  the  capital  stock  must  be  stated  in  the 
articles,  and  may  not  be  less  than  the  amount  which 
the  act  prescribes  and  which  varies  according  to 
the  population  of  the  place  in  which  the  bank  is  or- 
ganized. The  capital  may  be  increased  or  decreas- 
ed, and  any  impairment  thereof  must  be  made 
good,  in  the  manner  prescribed  by  the  act. 

28  A  shareholder  ceases  to  be  such  on  giving  notice  of  his  with- 
drawal within  the  required  time.  Kimball  v.  Apsey,  164  Fed.  830, 
90  C.  C.  A.  G34.  See,  also,  Aspey  v.  Whittemore,  199  jNIass.  65,  85  N. 
E.  91.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §§  248,  285; 
Gent.  Dig.  §  915. 

29  See  People  v.  Backus,  117  X.  Y.  196,  22  X.  E.  759.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Key  No.)  §  236;  Cent.  Dig.  §§  888-892. 

30  Act  July  12,  1SS2,  c.  290,  22  Stat.  162  (U.  S.  Comp.  St.  1901,  p. 
3457) ;  post,  p.  411. 

In  such  case  it  may  sue  and  be  sued.  Cogswell  v.  Second  Xat. 
Bank,  76  Conn.  252,  .56  Atl.  574.  It  may  continue  to  elect  officers 
and  directors.     Richards  v.  Attleborough  Xat.  Bank,  148  Mass.  187, 


§    95)  CAPITAL  STOCK — AMOUNT  •  369 

Capital  Stock — in  General 

The  act  prescribes  the  minimum  amount  of  capital,  which 
varies  according  to  the  population  of  the  place  injA^hich  the 
bank  is  organized/^  ^  The  capital  stock,  the  amount  of  which 
must  be  stated  in  the  articles,  must  be  divided  into  shares  of 
$100  each,  is  to  be  deemed  personal  property,  and  is  transfer- 
able on  the  books  of  the  association  in  such  manner  as  may  be 
prescribed  by  the  by-laws  or  articles.^-  At  least  50  per  cent,  of 
the  capital  stock  must  be  paid  in  before  the  bank  shall  be  au- 
thorized to  commence  business,  and  the  remainder  shall  be  paid 
in  installments  as  provided  by  the  act.^^  If  a  shareholder  fails 
to  pay  any  installment,  the  directors  may  sell  his  stock,  and 
if  there  be  no  bidder  the  amount  previously  paid  shall  be  for- 
feited, and  the  stock  sold,  or,  if  not  sold,  shall  be  canceled  and 
deducted  from  the  capital  stock ;  but  if  the  capital  is  thereby 
reduced  below  the  minimum,  it  must  be  increased  to  the  re- 
quired amount.^* 

Increase 

By  Rev.  St.  U.  S.  §  5142,  any  association  may  by  its  articles 
of  association  provide  for  an  increase  of  its  capital  from  time 
to  time,  but  the  maximum  of  such  increase  must  be  determined 
by  the  comptroller  of  the  currency,  and  no  increase  is  valid! 
until  the  whole  amount  is  paid  in,  and  notice  thereof  transmit- 
ted to  the  comptroller,  and  his  certificate  is  obtained,  specifying 
the  amount,  with  his  approval,  and  that  it  has  been  paid  in. 
The  above  section  was  modified  in  1886  by  an  act  which  pro- 
vides that  any  association  may,  with  the  approval  of  the  comp- 
troller by  vote  of  the  shareholders  owning  two-thirds  of  the 
stock,  increase  its  capital,  in  accordance  with  existing  laws,  to 

19  N.  E.  353,  1  L.  R.  A.  781.     See  "Banks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  2S6;  Cent.  Dig.  §§  88S-S92. 

31  Rev.  St.  U.  S.  §  5138,  as  amended  by  Act  March  14,  1900,  c.  41, 
§  10,  31  Stat.  48  (U.  S.  Conip.  St.  1901,  p.  34G1). 

3  2  Rev.  St.  U.  S,  §§  5134,  5139  (U.  S.  Conip.  St.  1901,  pp.  3454,  3461). 

33  Rev.  St.  U.  S.  §  5140  (U.  S.  Conip.  St,  1901,  p.  3461). 

3  4  Rev.  St.  U.  S.  §  5141  (U.  S.  Comp.  St.  1901,  p.  3462). 
Tiff.Bks.«&  B.— 24 


370  NATIONAL  BANKS  (Cll.  12 

any  sum  approved  by  the  comptroller,  notwithstanding  the 
limit  fixed  in  the  original  articles  and  determined  by  the  comp- 
troller, and  that  no  Increase,  either  within  or  beyond  the  limit 
fixed  in  the  original  articles,  shall  be  made  except  in  the  man- 
ner provided. ^^ 

To  constitute  a  valid  increase,  under  the  terms  of  section 
5142,  three  things  must  concur:  (1)  That  the  association,  in 
the  mode  pointed  out  in  the  articles,  and  not  in  excess  of  the 
maximum  provided  for  by  them,  shall  assent  to  an  increased 
amount;  (2)  that  the  whole  amount  of  the  proposed  increase 
shall  be  paid  in  as  part  of  the  capital ;  and  (3)  that  the  comp- 
troller, by  his  certificate  specif}:Jng  the  amount  of  such  in- 
crease, approve  and  certify  to  the  fact  of  its  payment.^^  When 
a  bank  undertakes  to  increase  its  capital  by  a  certain  amount, 
and  a  smaller  amount  is  actually  paid  in,  it  can  reduce  the 
amount  of  the  increase  to  the  amount  paid  in  ;  the  amount  of 
increase  within  the  maximum  being  always  subject  to  the  dis- 
cretion of  the  bank."  The  primary  object  of  the  provision  that 
no  increase  shall  be  valid  until  the  whole  amount  has  been  paid 
in  w^as  to  prevent  the  watering  of  stock;  that  is,  to  prevent 
business  being  done  upon  the  basis  of  a  capital  which  did  not 
in  fact  exist.  "If  this  provision  is  disregarded  by  a  national 
bank,  the  conduct  of  its  business  could  no  doubt  be  controlled 
by  the  representatives  of  the  government,  so  far  as  might  be 
necessary  to  compel  obedience  to  the  law.     Rev.  St.  U.  S.  § 

3^  Act  May  1,  1886,  c.  73,  24  Stat.  18  (U.  S.  Comp.  St.  1901,  p. 
3462). 

3  6  Delano  v.  Butler,  118  U.  S.  634,  7  Sup.  Ct.  39,  30  L.  Ed.  260. 
See,  also,  Winters  v.  Armstrong  (C.  C.)  37  Fed.  508 ;  McFarlin  v.  First 
Nat.  Bank,  68  Fed.  868,  16  C.  C.  A.  46 ;  Schierenberg  v.  Stephens,  32 
Mo.  App.  314;  City  of  Charleston  v.  People's  IS'at.  Bank,  5  S.  C.  103, 
22  Am.  Rep.  1.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2^1; 
Cent.  Dig.  §§  898-903. 

3  7  Delano  v.  Butler,  118  U.  S.  634,  7  Sup.  Ct.  39,  30  L.  Ed.  260. 
See,  also,  Aspinwall  v.  Butler,  133  U.  S.  595,  10  Sup.  Ct.  417,  33  L. 
Ed.  779.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2^1;  Cent. 
Dig.  §§  808-903. 


§    95)  CAPITAL    STOCK — AMOUNT  371 

5205  [U.  S.  Comp.  St.  1901,  p.  3495].  But  the  statute  does  not, 
in  terms,  make  void  a  subscription  or  certificate  of  stock,  based 
on  increased  capital  stock  actually  paid  in,  simply  b«eause  the 
whole  amount  *  *  *  has  not  in  fact  been  paid  into  the 
bank."  ^^  Accordingly  it  has  been  held  that  a  holder  of  cer- 
tificates of  stock  cannot  escape  liability  as  a  stockholder  to 
creditors  under  section  5151  (U.  S.  Comp.  St.  1901,  p.  3465), 
on  the  ground  that  the  shares  which  he  holds  are  part  of  an 
increase  which  was  made  without  compliance  with  the  act  of 
1886,  even  if  he  has  been  induced  to  take  such  shares  by  fraud 
of  the  officers  of  the  bank  and  of  the  comptroller.'^ 

•  3  8  Scott  V,  Deweese,  181  U.  S.  202,  21  Sup.  Ct.  5S5,  45  L.  Ed.  822. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2Jfl;  Gent.  Dig.  §§ 
898-903. 

39  A  holder  of  certificates  cannot  escape  liability  as  a  stockholder 
to  creditors  on  the  ground  that  the  shares  are  part  of  an  increase 
which  was  made  without  compliance  with  the  conditions  of  Act  May 
1,  1886,  c.  73,  24  Stat.  18  (U.  S.  Comp.  St.  1901,  p.  3462),  even  if  he 
has  been  induced  to  take  such  shares  by  fraud  of  the  officers  of  the 
bank  and  of  the  Comptroller.  Scott  v,  Deweese,  181  U.  S.  202,  21 
Sup.  Ct.  585,  45  L.  Ed.  822. 

Where  a  shareholder  subscribes  to  an  increase,  .and  pays  his  sub- 
scription, and  the  bank  afterwards  reduces  the  amount  of  the  in- 
crease, he  waives  all  right  to  deny  that  his  agreement  binds  him  as 
a  subscription  to  the  reduced  amount,  when  he  pays  on  his  new  stock 
an  assessment  declared  by  the  bank,  after  it  has  become  insolvent, 
to  prevent  its  business  from  being  closed  under  the  notice  of  the 
comptroller  of  the  currency  provided  for  in  section  5205,  Rev.  St. 
U.  S.  (U.  S.  Comp.  St.  1901,  p.  3495).  Delano  v.  Butler,  IIS  U.  S.  634,- 
7  Sup.  Ct.  39,  30  L.  Ed.  260. 

Where  a  person  subscribes  to^  a  proposed  increase,  and  pays  his 
subscription,  he  is  bound,  though  the  bank,  under  the  provisions  of 
its  by-laws,  to  "determine  what  disposition  shall  be  made  of  the  priv- 
ilege of  subscribing  for  the  new  stock,"  when  it  has  not  all  been  sub- 
scribed for  within  the  time  given  in  its  notice,  limits  the  amount  of 
the  increase  to  the  amount  paid  in.  Aspiuwall  v.  Butler,  133  U.  S. 
595,  10  Sup.  Ct.  417,  33  L.  Ed.  779. 

Where  a  subscriber  for  a  proposed  increase  pays  and  receives  a 
receipt,  and  is  entered  as  a  stockholder,  she  becomes  a  stockholder, 
though  her  certificate,  which  was  made  out  for  her  when  she  should 


372  NATIONAL  BANKS  (Ch.  12 

Reduction 

Any  association,  by  the  vote  of  the  shareholders  owning  two- 
thirds  of  its  capital  stock,  may  reduce  its  capital  to  any  sum 
not  below  the  amount  required  by  the  act ;  but  no  such  reduc- 
tion is  allowable  which  will  reduce  the  capital  below  the  amount 
required  for  its  outstanding  circulation,  and  no  reduction  may 
be  made  until  its  amount  has  been  reported  to  the  comptroller, 
and  his  approval  obtained.***  When  a  bank  reduces  its  capital, 
it  cannot  retain  as  a  surplus  fund,  or  for  any  other  purpose,  the 
whole  or  any  portion  of  the  money  which  it  receives  for  the 
stock  which  is  retired ;  but  the  capital,  to  the  extent  of  the  re- 
duction, being  no  longer  required  for  the  purpose  for  which 
it  was  subscribed,  must  be  returned  to  the  stockholders.*^  U 
is  otherwise  if  the  capital  is  impaired,  and  a  reduction  is  made 
merely  to  meet  the  impairment,  and  in  such  case  there  can  be 
no  distribution  among  the  shareholders.*^  But  on  a  reduction 
of  the  capital  by  a  vote  of  the  shareholders,  approved  by  the 
comptroller  on  the  assurance  of  the  president  and  directors  that 
bad  and  doubtful  assets  will  be  charged  ofif  and  set  aside  for 
the  benefit  of  the  then  shareholders,  the  directors  may  charge 
off  the  bad  and  doubtful  assets  as  in  effect  a  dividend  from  as- 
sets in  excess  of  capital  stock,  and  thereupon  the  right  to  re- 
ceive the  assets  thus  set  apart  is  irrevocably  vested  in  those  who 

call  for  it,  was  not  called  for  or  sent  to  her.  Her  position  was  not 
affected  by  the  fact  that  subsequently,  by  due  proceedings,  but  un- 
known to  her,  the  amount  of  the  proposed  increase  was  reduced. 
Pacific  Nat.  Bank  v.  Eaton,  141  U.  S.  227,  11  Sup.  Ct.  984,  35  L.  FA. 
702.  See,  also,  Latimer  v.  Bard  (C.  C.)  76  Fed.  536;  Columbia  Nat. 
Bank  of  Tacoma  v.  Mathews,  85  Fed.  934,  29  C.  C.  A.  491 ;  Brown  v. 
Tillinghast,  93  Fed.  326,  35  C.  C.  A.  323.  See  "Batiks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  2-'a;  Cent.  Dig.  §§  898-903. 

40  Rev.  St.  U.  S.  §  5143  (p.  S.  Comp.  St.  1901,  p.  3463). 

41  Seeley  v.  New  York  Nat.  Exch.  Bank,  78  N.  Y.  608,  affirming  8 
Daly,  40O,  1  Nat.  Bank  Cas.  804.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  No.)  §  2Jfl;  Cent.  Dig.  §  901. 

42  The  capital  had  become  impaired  by  nonpayment  of  interest  on 
bills  and  notes,  which  were  among  the  assets,  to  the  amount  of  $71,- 
000,  and  in  order  to  avoid  an  assessment  by  the  comptroller  the  stock- 


§    95)  CAPITAL   STOCK — AMOUNT  37.*^ 

are  shareholders  on  the  dale  of  the  comptroller's  approval  of 

the  reduction.^ ^ 

Impairment  of  Capital  _^^^ 

Every  association  which  fails  to  pay  up  its  capital  stock,  or 
whose  capital  becomes  impaired  by  losses  or  otherwise,  within 
three  months  after  notice  thereof  from  the  comptroller  of  the 
currency,  must  pay  the  deficiency  in  the  capital  stock,  by  as- 
sessment upon  the  shareholders  pro  rata ;  and  if  the  associa- 
tion fails  so  to  pay,  and  refuses  to  go  into  liquidation,  a  re- 
ceiver may  be  appointed  to  close  up  its  business.  If  a  share- 
holder neglects  or  refuses,  after  three  months'  notice,  to  pay 
the  assessment,  it  is  the  duty  of  the  directors  to  cause  a 
sufficient  amount  of  his  stock  to  be  sold  at  public  auction  to 
make  good  the  deficiency.**  The  assessment  to  be  made  on 
notice  that  the  capital  is  impaired,  so  as  to  avoid  liquidation, 
is  not  the  assessment  contemplated  by  the  section  by  which  the 
shareholders  may  be  compelled  to  discharge  their  individual 
responsibility  for  the  debts  of  the  association,  a  liability  which 
does  not  arise  except  in  case  of  liquidation  and  for  the  pur- 
pose of  winding  up  the  afifairs  of  the  bank.*^     It  is  to  be 

holders  reduced  the  capital  stock,  and  carried  the  bills  and  notes  to 
rthe  account  of  suspended  or  "bad  debts,"  which  were  not  thereafter 
included  as  assets,  although  retained  in  the  bank's  custody.  Some 
years  afterwards  the  bank  realized  .$7.5,000  from  collaterals  pledged 
for  the  security  of  the  bills  and  notes.  On  a  suit  by  a  stockholder  to 
compel  the  bank  to  distribute  to  him  a  share  of  the  amount  realized, 
proportioned  to  the  amount  of  stock  surrendered,  held,  that  he  could 
not  recover.  McCann  v.  First  Nat.  Bank  of  Jeffersonville,  112  Ind. 
354,  14  N.  E.  251.  See,  also,  Id.,  131  Ind.  95,  30  N.  E.  893.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  S8;  Gent.  Dig.  §  JfS. 

4  3  Cogswell  V.  Second  Nat.  Bank,  78  Conn.  75,  GO  Atl.  1059,  affirmed 
Jerome  v.  Cogswell,  204  U.  S.  1.  27  Sup.  Ct.  241,  51  Lr.  Ed.  343.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2-^;  Cent.  Dig.  §§  898- 
903. 

■ii  Kev.  St.  V.  S.  §  5205,  as  amended  by  Act  June  30,  1876,  e.  156. 
§  4,  19  Stat.  (;4  (U.  S.  Comp.  St.  1901,  p.  3495) ;    ante,  p.  369. 

4  5  See  Delano  v.  Butler,  118  U.  S.  634,  7  Sup.  Ct.  39,  30  L.  Ed.  260. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  -§  2Jfl;  Cent.  Dig. 
§§  898-903. 


374  NATIONAL  BANKS  (Ch.  12 

made  by  the  stockholders  themselves,  and  an  assessment  by 
the  directors  is  void  ;**'  and  it  is  enforceable  only  by  subjecting 
the  stock  of  the  stockholders  who  refuse  to  pay  to  sale,  and 
no  action  lies  against  the  stockholders  personally/'^  A  sale  to 
meet  the  assessment  is  void,  unless  the  stock  brings  an  amount 
equal  to  the  assessment.*^ 

Subscription  to  and  Issue  of  Stock 

The  act  does  not  prescribe  any  particular  formalities  in  re- 
spect to  subscriptions  to  stock.  "Without  express  regulations 
to  the  contrary,  a  person  becomes  a  stockholder  by  subscribing 
for  stock,  paying  the  amount  to  the  company  or  its  proper  of- 
ficer, and  being  entered  on  the  stock  book  as  a  stockholder.  He 
may  take  out  a  certificate  or,  not  as  he  sees  fit.  *  *  *  A 
certificate  is  authentic  evidence  of  title  to  the  stock ;  but  it  is 
not  the  stock  itself,  nor  is  it  necessary  to  the  existence  of  tlie 
stock.  It  certifies  to  a  fact  that  exists  independently  of  it- 
self." *^  A  subscription  induced  by  fraud  is  voidable  at  the 
option  of  the  subscriber,  but  is  valid  until  repudiated,  and  if 
the  subscriber  affirms  the  subscription  after  knowledge  of  the 
fraud  he  cannot  afterwards  repudiate  it.  He  will  affirm,  if 
with  knowledge  he  takes  part  as  a  shareholder  in  the  manage- 
ment, or  pays  assessments  on  his  shares,  or  takes  any  benefit 
from  them.^°  And  it  has  been  held  that  one  who  has  been  in- 
duced to  subscribe  to  stock  in  a  national  bank,  who  continues, 

4  6  Commercial  Nat.  Bank  v.  Weinhard.  192  H.'s.  243,  24  Sup.  Ct. 
2.5.S,  48  L.  Ed.  42.o ;  Hnlitt  v.  Bell  (C.  C.)  So  Fed.  SS.  See,  also,  In  re 
Hulitt  (C.  C.)  96  Fed.  785.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §§  2U,  U6;  Gent.  Dig.  §§  898-908. 

47  Hulitt  V.  Bell  (C.  C.)  85  Fed.  98.  See  "Banks  and  Banking;' 
Dec.  Dig.  (Key  No.)  §  246;  Cent.  Dig.  §§  911,  912. 

48  Merchants'  Nat.  Bank  of  Rome  v.  Fouche,  103  Ga.  851,  31  S.  E. 
87.  See  "Banks  and  Banking,  Dec.  Dig.  (Key  No.)  §  2Ji6;  Cent.  Dig. 
§§  911,  912. 

4  0  Pacific  Nat.  Bank  v.  Eaton,  141  U.  S.  227,  11  Sup.  Ct.  984,  35  L. 
Ed.  702.    See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  2Jt2. 
50  Clark,  Corp.  (2d  Ed.)  277  et  seq. 


I 


§    96)  TUANSFEK   OF   SHARES  375 

until  the  bank  is  placed  in  liciuidation,  to  act  as  a  stockholder 
and  receives  dividends,  though  without  knovvlerlge  of  the  fraud, 
cannot  rescind  as  aqainst  the  bank's  creditors. '^^ 


TRANSFER  OF  SHARES 

96.  The  capital  stock  is  personal  property,  and  is  transfer- 
able on  the  books  of  the  association,  as  may  be  pre- 
scribed in  the  by-laws  or  articles,  and  every  person 
becoming  a  shareholder  by  such  transfer  succeeds 
to  the  rights  and  liabilities  of  the  holder  of  the 
shares.  As  between  seller  and  buyer,  a  sale  of 
shares  is  complete  when  the  certificate,  duly  as- 
signed, with  power  to  transfer  on  the  books,  is  de- 
livered. Transfer  on  the  books  is  necessary  to 
protect  the  seller  against  subsequent  liability  as  a 
stockholder  to  creditors  of  the  association;  but  it 
seems  that  the  rights  of  an  unregistered  transferee 
are  superior  to  the  rights  of  an  attaching  creditor 
of  the  transferror  without  notice. 

The  act  provides  that  the  capital  stock  is  transferable  on  the 
books  of  the  association  in  such  manner  as  may  be  prescribed 
in  the  by-laws  or  articles  of  association,  that  every  person  be- 
coming a  shareholder  by  such  transfer  shall  succeed  to  the 
rights  of  the  prior  holder^  of  the  shares,  and  that  no  change 
shall  be  made  in  the  articles  by  which  the  rights,  remedies,  or 
security  of  the  existing  creditors  shall  be  impaired.''^ 

A  stockholder  may  make  a  bona  fide  transfer  to  any  person 
capable  of  taking  and  holding  the  stock  and  assuming  the  trans- 
si  Scott  V.  Latimer,  89  Fed.  843,  3.^,  C.  C.  A.  1.  See.  also,  Wallace 
V.  Hood  (C.  C.)  89  Fed.  11 ;  Hood  v.  Wallace,  97  Fed.  9S.S,  38  C.  C.  A. 
G92,  affirmed  182  U.  S.  5.-).5,  21  Sup.  Ct.  88.5,  4.5  L.  Ed.  1227;  Lanti-y 
V.  Wallace,  97  Fed.  8(i.5,  38  C.  C.  A.  .510.  Cf.  Stufllebeam  v.  De  Lash- 
mutt  (C.  0.)  101  Fed.  307.  -See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  2J,2. 

52  Rev.  St.  U.  S.  §  51.39  (U.  S.  Comp.  St.  1901,  p.  3461). 


370  NATIONAL  BANKS  (Ch.  12 

ferror's  liabilities.^^'  The  directors  or  other  shareholders  have 
no  aiuliority  to  approve  or  reject  a  bona  fide  transfer,  nor  can 
they  refuse  to  register  it  without  a  valid  and  lawful  reason.^* 
As  between  the  seller  and  buyer  of  shares,  the  sale  is  complete 
when  the  certificate,  duly  assigned,  with  power  to  transfer  the 
same  on  the  books  of  the  bank,  is  delivered,  and  payment  there- 
for received. ^^  "The  entry  of  the  transaction  on  the  books  of 
the  bank,  where  stock  is  sold,  is  required,  not  for  the  transla- 
tion of  the  title,  but  for  the  protection  of  the  parties  and  oth- 
ers dealing  with  the  bank,  and  to  enable  it  to  know  who  are  its 
stockholders,  entitled  to  vote  at  their  meetings  and  receive 
dividends  when  declared.  It  is  necessary  to  protect  the  seller 
against  subsequent  liability  as  a  stockholder,  and  perhaps  also 
to  protect  the  purchaser  against  proceedings  of  the  seller's 
creditors."  ^®  The  question  of  the  rights  of  an  attaching  cred- 
itor to  stock  transferred  by  an  unregistered  assignment  is  left 
in  the  passage  above  quoted  as  not  definitely  settled.  The  view 
has  generally  prevailed,  however,  that  the  provisions  of  the 
National  Bank  Act  with  reference  to  the  transfer  on  the  books 
of  the  association  was  enacted  for  the  benefit  of  the  corpora- 
tion, its  shareholders,  and  creditors,  and  that  as  to  other  per- 
sons a  transfer  good  at  common  law  is  sufficient,  and  that  the 
rights  of  a  transferee  under  an  unregistered  assignment  are 
superior  to  the  rights  of  a  subsequent  attaching  creditor  of  the 
transferror  without  notice.^'^ 

53  Johnson  v.  Laflin,  Fed.  Cas.  No.  T.SO.S,  5  Dill.  65.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  -¥o.)  §  2. ',3;  Cent.  Dig.  §§  9^-908. 

54  Johnson  v.  Laflin,  Fed.  Cas.  No.  7,393.  5  Dill.  65,  affirmed 
Johnston  v.  Laflin,  103  U.  S.  800.  26  L.  Ed.  532.  See  "Banks  and 
Banklngr  Dec.  Dig.  {Key  No.)  §  2',.i;  Cent.  Dig.  §§  90J,-908. 

55  Johnson  v.  Laflin.  Fed.  Cas.  No.  7,393,5  Dill.  (55.  See,  also,  Lar- 
imer V.  Beardsley,  130  Iowa,  700,  107  N.  W.  935.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  2J,3 ;  Cent.  Dig.  §§  90^-908. 

56  Johnston  v.  Laflin,  103  U.  S.  800,  26  L.  Ed.  532;  post,  p.  388. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  2J,3;  Cent.  Dig.  §§ 
90.'t-908. 

5  7  Continental  Nat.  Bank  v.  Eliot  Nat.  Bank  (C.  C.)  7  Fed.  309; 
Scott  V.  I'equounock  Nat.  Bank  (C.  C.)  15  Fed.  404;  Hazard  v.  Na- 


§    97)  LIEN    ON    SHARES  377 

LIEN  ON   SHARES 

97.  The  association  has  not  by  the  act  a  lien  on  the  shares 
of  stockholders  for  debts  due  from  them  to  it ;  and 
any  provision  in  the  by-laws  or  articles  prohibiting 
the  transfer  of  shares  of  a  stockholder  indebted  to 
the  association,  or  otherwise  giving  the  association 
a  lien  on  his  shares,  is  invalid. 

At  common  law  a  .corporation  has  no  lien  on  the  shares  of 
its  stockholders  for  debts  due  to  it  from  them,  and  the  fact  that 
a  stockholder  is  indebted  to  the  corporation  is  not  ground  for 
its  refusal  to  recognize  and  register  a  bona  fide  transfer,  unless 
a  lien  is  given  or  authorized  by  the  charter.^^  Under  the  act 
of  1863  the  transfer  of  stock  was  subject  to  debts  due  by  the 
stockholders  to  the  bank,  but  that  act  was  repealed  by  the 
act  of  1864,  which  contains  no  such  provision,  and  which  pro- 
hibits any  national  bank  from  making  loans  or  discounts  on 
the  security  of  or  purchasing  or  holding  the  shares  of  its  own 
capital  stock.^''  Under  the  present  law  a  national  bank  cannot 
acquire  a  lien  on  the  shares  of  its  stockholders.  It  is  true  that 
the  directors  have  power  to  define  and  regulate,  by  by-laws  not 
inconsistent  with  the  provisions  of  the  act,  the  manner  in  which 
the  stock  shall  be  transferred,  and  that  the  stock  is  transferable 
on  the  books  in  such  manner  as  may  be  prescribed  by  the  by- 
laws or  articles.""  But  power  to  make  and  enforce  a  by-law 
giving  a  lien  is  not  given,  and  any  provision  of  the  articles  or 
by-laws  prohibiting  the  transfer  of  stock  owned  by  a  stock- . 

tional  Exch.  Bank  (C.  C.)  2tj  Fed.  94;  Doty  v.  First  Nat.  Bank  of 
Larimore,  ?>  X.  D.  9,  53  N.  W.  77,  17  L.  R.  A.  2.j9.  See,  also,  First  Nat. 
Bank  t.  Lanier,  11  Wall.  SfW.  20  L.  Ed.  172;  Dickinson  v.  Central 
Nat.  Bank,  129  Mass.  279,  Zl  Am.  Hep.  301.  /Sec  ''Bunks  and  Bank- 
ing," Dec.  Dig.  (Keg  No.)  §  243;  Cent.  Dig.  §§  90.',-908. 

58  Clark,  Corp.  (2d  Ed.)  401,  443. 

59  Ante,  pp.  249,  279.    See  cases  cited  post,  note  01. 

60  Rev.  St.  U.  S.  §§  5136,  5139  (U.  S.  Conip.  St.  1901,  pp.  3455,  34G1). 


378  NATIONAL  BANKS  (Ch.  12 

holder  indebted  to  the  bank  until  such  indebtedness  shall  be 
satisfied,  or  otherwise  giving  the  bank  a  lien  on  his  shares,  is 
invalid.*^ 

RIGHTS  OF  STOCKHOLDERS 

98.  Every  stockholder  is  entitled  to  vote  at  meetings  of  the 
shareholders  in  person  or  by  proxy,  and  has  the 
common-liiw  right  to  inspect  the  books  of  the  cor- 
poration. I 

Right  to  Vote 

In  elections  of  directors  and  in  deciding  all  questions  at  meet- 
ings of  shareholders,  shareholders  are  entitled  to  one  vote  on 
each  share  held  by  them,  and  may  vote  by  proxies  duly  au- 
thorized in  writing ;  but  no  officers,  clerk,  teller,  or  bookkeeper, 
may  act  as  a  proxy,  and  no  shareholder  whose  "liability  is  past 
due  and  unpaid"  shall  be  allowed  to  vote.^^  The  past-due 
and  unpaid  liability  of  a  shareholder  which  disqualifies  him 
from  voting  is  limited  to  his  liability  for  unpaid  subscriptions 
to  stock.  "^^ 

Right  to  Examine  Books 

The  common-law  right  of  a  stockholder,  for  proper  purposes 
and  under  reasonable  regulations  as  to  place  and  time,  to  in- 
spect tke  books  of  the  corporation,  is  not  restricted  as  to  nation- 
al banks  by  Rev.  St.  U.  S.  §  5211  (U.  S.  Comp.  St.  1901,  p. 
3498),  requiring  such  banks  to  make  reports  to  the  comptroller 
of  the  currency,  or  by  section  5240  (page  3516),  providing  for 
/ 

61  First  Nat.  Bank  v,  Lanier,  11  Wall.  3G9,  20  L.  Ed.  172;  BuUard 
V.  National  Eagle  Bank,  18  Wall.  oS9.  21  L.  Ed.  923 ;  Third  Nat.  Bank 
V.  Buffalo  German  Ins.  Co.,  193  U.  S.  583,  24  Sup.  Ct.  524,  48  L.  Ed. 
801.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  2Ji5;  Cent. 
Dig.  §§  909,  910. 

6  2  Rev.  St.  U.  S.  §  5144  (U.  S.  Comp.  St.  1901,  p.  3463). 

63  United  States  v.  Barry  (C.  C.)  3G  Fed.  246.  See  "Banks  and 
Banking,''  Cent.  Dig.  §  941;  "Corporations,"  Dec.  Dig.  {Key  No.)  § 
191/;  Cent.  Dig.  §§  7J,7-763. 


§  99)  DIVIDENDS  379 

the  appointment  of  examiners,  or  by  section  5241  (page  3517), 
providing  that  no  bank  "shall  be  subject  to  any  visitorial  powers 
other  than  such  as  arc  authorized  by  this  title,  or  ar^^ested  in 
the  courts  of  justice" ;  and,  in  order  to  determine  the  value  of 
his  stock,  a  stockholder  may  obtain  such  relief  in  the  state 
courts  under  a  state  statute  declaring  the  books  of  any  corpo- 
ration subject  to  the  inspection  of  stockholders.®* 


DIVIDENDS 

99.  Power  to  declare  dividends  is  expressly  conferred  upon 
the  directors,  subject  to  certain  limitations.  The 
declaration  of  dividend  in  violation  of  the  act,  while 
it  may  be  ground  for  forfeiture  of  the  charter,  and 
for  an  action  against  the  directors  for  damages  suf- 
fered by  the  association,  does  not  render  them 
liable  criminally. 

The  directors  may  semiannually  declare  a  dividend  of  so 
much  of  the  net  profits  as  they  shall  judge  expedient;  but  the 
association  must,  before  declaring  a  dividend,  convey  one-tenth 
of  its  net  profits  of  the  preceding  half  year  to  its  surplus  fund 
until  it  shall  amount  to  20  per  cent,  of  its  capital  stock. ^^  No 
portion  of  the  capital  must  be  withdrawn  in  the  form  of  divi- 
dends or  otherwise ;  and  if  losses  equal  to  or  exceeding  the 
net  profits  have  been  sustained,  no  dividend  shall  be  made  ;  and 
no  dividend  shall  ever  be  made  to  an  amount  greater  than  the 
net  profits  then  on  hand,  deducting  therefrom  losses  and  bad 
debts,  all  debts  due  the  association  on  which  interest  is  past 

64  Guthrie  v.  Harkness,  199  U.  S.  148,  26  Sup.  -Ct.  4,  50  L.  Ed.  130. 
See,  also,  Winter  v.  Baldwin,  89  Ala.  483,  7  South.  734 ;  Woodworth 
V.  Old  Second  Nat.  Bank,  154  ilich.  459,  117  N.  W.  893 ;  People  ex  rel. 
Lorge  V.  Consolidated  Nat.  Bank,  105  App.  Div.  409,  94  N.  Y.  Supp. 
173.  See  ''Banks  and  Banl:inf/,"  Dec.  DUj.  {Key  No.)  §§  J/3,  2^6;  Cent. 
Dig.  §§  61.  0]2. 

65  Rev.  St.  U.  S.  §  5199  (U.  S.  Comp.  St.  1901,  p.  3494). 


380  NATIONAL  BANKS  (Ch.  12 

due  and  unpaid  for  six  months,  unless  they  are  well  secured 
and  in  process  of  collection  being  considered  bad  debts.®** 

Under  the  foregoing  provisions  assets  which  it  is  not  neces- 
sary to  retain  as  capital  or  for  the  surplus  fund  may  be  re- 
turned to  the  shareholders,  and  dividends  so  ordered  may  be 
made  payable  in  the  future,  and  on  the  contingency  of  future 
collection.®''  The  declaration  by  the  directors  of  a  dividend 
when  there  are  no  net  profits  to  pay  it,  while  an  act  of  mal- 
administration which  may  subject  the  association  to  a  forfeiture 
of  its  charter  and  the  directors  to  a  personal  action  for  dam- 
ages suffered  by  the  association  or  its  shareholders,  does  not 
render  them  liable  to  a  criminal  prosecution.®^  Nor  can  a  re- 
ceiver of  the  bank  recover  a  dividend  paid,  not  out  of  profits, 
but  entirely  out  of  the  capital,  where  the  stockholders  receiving 
the  dividend  acted  in  good  faith,  believed  it  to  be  paid  out  of 
profits,  and  the  bank,  when  it  was  declared  and  paid,  was  not 
insolvent.®®  Nor  can  the  directors  be  held  personally  liable 
for  money  paid  out  for  dividends  to  a  greater  amount  than  net 

66  Rev.  St.  U.  S.  §  5204  (U.  S.  Comp.  St.  1901,  p.  3495). 

6  7  Cogswell  V.  Second  Nat.  Bank,  78  Conn.  75,  60  Atl.  1059,  affirm- 
ed Jerome  v.  Cogswell.  204  U.  S.  1,  27  Sup.  Ct.  241,  51  L.  Ed.  343. 
See  ''Banks  and  Bankinfj"  Dec.  Dig.  (Key  No.)  §  2U;  Cent.  Dig.  §§ 
55,  60.  910. 

68  United  States  v.  Britton,  108  U.  S.  199,  2  Sup.  Ct.  531,  27  L.  Ed. 
698.  See  "Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §  256;  Cent. 
Dig.  §  96J,. 

69  McDonald  v.  Williauis,  174  U.  S.  397,  19  Sup.  Ct.  743,  43  L.  Ed. 
1022. 

The  receiver  may  recover  from  a  stockhulder  dividends  declared, 
and  paid  after  the  bank  became  insolvent,  when  necessary  to  me^t 
the  demands  of  creditors.  Hayden  v.  Williams,  96  Fed.  279,  37  C. 
C.  A.  479. 

The  receiver  cannot  recover  from  a  stockholder,  in  an  action  at 
law,  a  sum  received  by  him  on  a  partial  distri)jution  of  the  capital, 
made  and  received  in  good  faith  during  voluntary  liquidation,  when 
the  bank  was  at  the  time  solvent,  and  retained  sufficient  assets  to 
pay  all  its  liabilities,  although  it  subsequently  became  insolvent. 
Lawrence  v.  Greenup,  97  Fed.  906.  38  C.  C.  A.  546.  Sec  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  248;  Cent.  Dig.  §§  913-915. 


§    lUO)  LIABILITY    OF    STOCKHOLDERS   FOU   DEBTS  381 

profits  after  deducting  losses  and  bad  debts,  because  there  were 
debts  bad  in  fact,  but  supposed  to  be  good;  bad  judgment, 
without  bad  faith,  not  making  the  directors  individualb^iable.'^'* 

LIABILITY   OF  STOCKHOLDERS   FOR   DEBTS 
OF  BANK 

100.  The  shareholders  are  individually  liable  equally  and 
ratably,  for  the  debts  of  the  association,  to  an 
amount  equal  to  the  amount  of  the  stock  held  by 
them,  at  its  par  value,  in  addition  to  the  amount 
that  may  be  due  on  the  shares. 

The  act  provides  that  the  shareholders  of  every  association 
"shall  be  held  individually  responsible,  equally  and  ratably,  and 
not  one  for  another,  for  all  contracts,  debts,  and  engagements 
of  such  association,  to  the  extent  of  the  amount  of  their  stock 
therein,  at  the  par  value  thereof,  in  addition  to  the  amount 
invested  in  such  shares."  '^^ 

"The  liability  exists  by  virtue  of  the  statute  and  the  assent 
of  the  corporators  to  its  provisions,  given  by  the  contract  which 
they  entered  into  with  Congress  in  accepting  the  charter.  With 
respect  to  the  character  of  that  liability  *  *  *  it  is  several, 
and  cannot  be  made  joint,  and  *  *  *  the  shareholders  are 
not  intended  to  be  put  in  the  relation  of  sureties  or  guarantors, 
'one  for  another,'  as  to  the  amount  which  each  might  be  re 
quired  to  pay.  *  *  *  The  insolvency  of  one  stockholder, 
or  his  being  beyond  the  jurisdiction  of  the  court,  does  not  af- 
fect the  liability  of  another."  ^^    The  statvtte  imposes  upon  the 

7  0  Witters  v.  Sowles  (C.  C.)  31  Fed.  1. 

The  liability  cannot  be  enforced  in  an  action  at  law.  Welles  v. 
Graves  (C.  C.)  41  Fed.  459;  post,  p.  897.  See  "Banks  and  Baiihina." 
Dec.  Dig.  {Key  No.)  §  23Jt;  Gent.  Dig.  §  951. 

Ti  Rev.  St.  U.  S.  §  5151  (U.  S.  Comp.  St.  1901,  p.  3465). 

'2  United  States  ex  rel.  Citizens'  Nat.  Bank  v.  Knox,  102  U.  S. 
422,  26  L.  Ed.  216.  See,  also,  Lease  v.  Barschall  (C.  C.)  106  Fetl. 
762.     Cf.  Christopher  v.  Norvell,  201  U.  S.  210,  26  Sup.  Ct.  502,  50 


382  NATIONAL   BANKS  (Ch.  12 

shareholders  "an  individual  responsibility  for  all  its  contracts, 
debts,  and  engagements,  and  the  terms  in  which  the  obligations 
are  created  is  unconditional  and  unqualified,  except  that  the 
liability  shall  be  equal  and  ratable  among  the  stockholders."  ''' 
As  the  liability  of  the  stockholder  is  for  the  debts,  contracts, 
and  engagements  of  the  bank,  he  is  liable  for  such  interest  as, 
according  to  the  nature  of  the  contract  or  debt,  would  exist 
against  the  bank.''* 


WHO  ARE  LIABLE  AS  SHAREHOLDERS 

101.  Those  who  appear  as  shareholders  on  the  books  of  the 
association  are  prima  facie  liable  as  such.  But 
there  are  some  exceptions : 

1.  A  person  in  whose  name  shares  are  registered 
without  his  knowledge  or  consent,  express  or  im- 
plied, is  not  liable. 

2.  The  real  owner  is  liable,  although  he  has  caus- 
ed the  shares  to  be  registered  in  the  name  of  an- 
other, whether  in  good  faith  or  in  order  to  conceal 
his  ownership. 

3.  A  mere  pledgee  is  not  liable,  if  the  shares  are 
registered  in  his  name  as  such,  or  are  registered  in 
the  name  of  another. 

4.  A  trustee  is  not  liable,  if  the  shares  are  regis- 
tered in  his  name  as  such;  but  the  persons  whom 
or  the  estate  which  he  represents  are  liable. 

5.  When  there  is  a  valid  and  complete  transfer 
on  the  books,  the  transferror  is  relieved  from  liabil- 

L.  Ed.  732.  See  "Banks  and  Baiikmg,"  Dec.  Dig.  (Key  No.)  §  2^8; 
Oent.  Dig.  §§  913-931. 

7  3  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  788,  30  L.  Ed.  864. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  248;  Cent.  Dig.  §§ 
918-931. 

n  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  788,  30  L.  Ed.  864. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2J,S;  €ent.  Dig.  §§ 
913-931. 


§    101)  WHO    AUE    LIABLE    AS    SHAREHOLDERS  383 

ity,  and  the  transferee  succeeds  thereto.  A  trans- 
ferror is  relieved,  although  the  transfer  is  not  reg- 
istered, if  he  has  done  everything  to  effec^tegistra- 
tion  that  a  careful  man  could  reasonably  do.  A 
transferror  is  not  relieved  by  a  colorable  transfer; 
nor  is  he  relieved  by  a  transfer  out  and  out,  if  made 
in  view  of  the  insolvency  of  the  association  and  in 
fraud  of  creditors  to  an  irresponsible  person,  or 
even  to  a  responsible  person,  unless  the  transferror 
can  prove  that  he  was  responsible;  but  in  such 
cases  the  transferee  also  is  liable. 

Who  Deemed  to  be  Shareholder 

As  a  rule,  any  one  whose  name  appears  on  the  books  of  the 
bank  as  a  stockholder  is  a  shareholder  for  purposes  of  assess- 
ment ;  and  the  burden  of  showing-  that  he  is  not  a  shareholder 
rests  upon  him.'^  Of  course,  a  transfer  on  the  books  of  the 
bank  to  a  person  without  his  knowledge  and  consent  would  not 
subject  him  to  the  liability  of  a  shareholder;  ''^  but  if  he  rati- 
fies or  acquiesces  in  the  transfer,  as  by  accepting  benefits  there- 
under, he  is  liable.^ ^    For  this  purpose  a  transfer  on  the  books, 

T 5  Irons  V.  Manufacturers'  Nat.  Bank  (C.  C.)  17  Fed.  .308;  Turn- 
bull  V.  Payson.  9.j  U.  S.  418,  24  L.  Ed.  4.37 ;  Finn  v.  Brown,  142  U.  S. 
56,  12  Sup.  Ct.  136,  35  L.  Ed.  936.  See  "BanJcs  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  2Ji8;   Cent.  Dig.  §§  913-931. 

-sKeyser  v.  Hitz,  1.33  U.  S.  138,  10  Sup.  Ct.  290,  33  L.  Ed.  531; 
Stephens  v.  FoUett  (C.  C.)  43  Fed.  842. 

One  buying  stock  in  the  names  of  minor  children  is  liable,  since 
they  are  incapable  of  assenting.  Foster  v.  Chase  (C.  C.)  75  Fed. 
797;  Foster  v.  T\  ilson  (C.  C.)  75  Fed.  797.  See  "Banks' and  BanJc- 
ing,"  Dec.  Dig.  (Key  .To.)  §  2.'/S;    Cent.  Dig.  §§  913-931. 

7  7  Keyser  v.  Hitz,  133  U.  S.  138,  10  Sup.  Ct.  290,  33  L.  Ed.  531. 

If  one  is  elected  to  an  office  for  which  ownership  of.  stock  is  a 
qualification,  and  shares  are  transferred  to  him  on  the  books,  and  he 
acts  as  such  officer,  he  will  be  chargeable  with  knowledge  that 
shares  stand  in  his  name.  Finn  v.  Brown,  142  U.  S.  56,  12  Sup.  Ct. 
136,  35  L.  Ed.  936. 

One  who  was  notified  that  shares  had  been  transferred  into  his 


384  NATIONAL  BANKS  (Ch.  12 

without  the  issue  of  a  new  certificate,  is  sufficient.^''  The  fact 
■ihat  record  owners  may  be  held  does  not  necessarily  mean  that 
actual  holders  may  not  be  held.  The  real  owner  is  liable,  and 
one  purchasing  for  himself  and  causing  the  transfer  to  be 
made  in  the  name  of  another,  whether  in  good  faith  or  so  as  to 
conceal  his  ownership,  is  liable.'^ ^  A  married  woman,  who  is  a 
stockholder,  is  subject  to  the  statutory  liability,  although  she 
may  be  incapable  under  the  local  law  from  making  or  binding 
herself  personally  by  a  contract,  if  such  law  does  not  incapaci- 
tate her  from  becoming  the  owner  of  such  stock. ^°  One  who 
becomes  a  stockholder  in  consequence  of  frauds  practiced  upon 
him  by  others,  whether  the  officers  of  the  bank  or  of  the  gov- 
ernment, is  estopped,  as  against  creditors,  to  deny  that  he  is 
a  shareholder,  if  at  the  time  the  rights  of  creditors  accrued 
he  was  accorded  and  exercised  the  rights  of  a  shareholder.^^ 

name,  although  he  had  in  fact  no  interest  therein,  and  who  in- 
dorsed the  certificates  in  blank,  but  took  no  steps  to  have  the  stock 
transferred  to  the  name  of  the  true  owner,  cannot  avoid  liability  for 
an  assessment  thereon.  Kenyon  v.  Fowler,  155  Fed.  107,  S3  C.  C.  A. 
567,  affirmed  215  U.  S.  593,  30  Sup.  Ct.  409,  54  L.  Ed.  341.  See 
"Banlcs  and  Banking,"  Dec.  Dig.  {Key  No.)  §  2Jf8;  Cent.  Dig.  §§  913- 
931. 

7  8  Keyser  v.  Hitz,  133  U.  S.  138,  10  Sup.  Ct.  290,  33  L,  Ed.  531. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2Jt8;  Cent.  Dig.  §§ 
913-931. 

T9  Davis  V.  Stevens,  Fed.  Cas.  No.  3,653,  17  Blatchf.  259;  Hubbell 
v.  Houghton  (C.  C.)  86  Fed.  547 ;  Houghton  v.  Hubbell,  91  Fed,  4-53, 
33.  C.  C.  A,  574.  See,  also,  Pauly  v.  State  Loau  &  Trust  Co.,  165 
U.  S.  606,  17  Sup.  Ct.  465,  41  L.  Ed.  844.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  2^8;    Cent.  Dig.  §§  913-931. 

80  Keyser  v.  Hitz,  133  U.  S.  138,  10  Sup.  Ct.  290.  33  L.  Ed.  531; 
Christopher  v.  Norvell,  201  U.  S.  216,  26  Sup.  Ct.  502,  50  L.  Ed.  7.32 
(and  cases  cited).  See,  also,  Bundy  v.  Cocke,  128  U.  S.  185,  9  Sup. 
Ct.  242,  32  L.  Ed.  396.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  2.',8j    Cent.  Dig.  §§  913-931. 

81  Scott  V.  Deweese,  181  U.  S.  202,  21  Sup.  Ct.  585,  45  L.  Ed.  822. 
Fraudulent    representations    by    which    one    is    induced    to    take 

shares  is  no  defense  in  an  action  at  law  by  the  receiver  to  enforce 
the  liability.    Lantry  v.  Wallace,  182  U.  S.  536,  21  Sup.  Ct.  878,  45  L. 


§    101)  ft'IIO    ARE    LIABLE    AS   SHAREHOLDERS  385 

Pledgee 

if  stock  is  issued  or  transferred  to  a  person  in  such  a  way 
that  lie  appears  on  the  books  as  the  legal  and  real  owner,  the 
creditors  cannot  be  required  to  go  behind  the  books,  and  he  is 
subject  to  the  liability  to  creditors,  though  he  may  hold  the 
stock  only  as  collateral  security.*-  On  the  other  hand,  a  pled- 
gee of  shares,  who  appears  on  the  books  to  be  such,  and  not  to 
be  the  owner,  is  not  liable.**^  And  in  the  absence  of  actual 
fraudi  or  bad  faith  a  mere  pledgee  of  shares  is  not  liable,  where 
he  is  not  registered  as  the  owner,  although  he  has  procured 
a  transfer  of  the  shares  to  an  irresponsible  person  with  the 
avowed  purpose»of  avoiding  such  liability.**  But  if  the  pledgee 
ceases  to  be  such,  and  becomes  the  real  owner  of  the  shares,  al- 

Ed.  121S;  Hood  v.  Wallace,  1S2  U.  S.  555,  21  Sup.  Ct.  885,  45  L.  Ed. 
1227.  See  "Banlcs  and  Banking,"  Dec.  Dig.  {Key  No.)  §  2J,8;  Cent. 
Dig.  §§  913-931. 

8  2Germanla  Nat.  Bank  v.  Case,  99  U.  S.  628,  25  L.  Ed.  448; 
Bowden  v.  Farmers'  &  .  Merchants'  Nat.  Bank  of  Baltimore,  Fed. 
Cds.  No.  1,714,  1  Hughes,  307.  See  "BanJcs  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  2Jt8;   Cent.  Dig.  §§  913-931. 

83  Pauly  V.  State  Loan  &  Trust  Co.,  1G5  U.  S.  606,  17  Sup.  Ct.  465, 
41  L.  Ed.  844. 

A  bank  which  receives  as  collateral  for  a  note  the  stock  of  a  na- 
tional* bank,  and  on  default  proceeds  to  sell  the  stock  and  bid  it  In, 
is  not  liable  as  a  stockholder  in  the  national  bank,  where  it  never 
has  a  transfer  made  6n  the  books,  and  as  between  the  pledgee  bank 
and  the  debtor,  who  claims  that  the  sale  is  invalid,  the  stock  con- 
tinues to  be  held  merely  as  collateral  for  his  debt.  Robinson  v. 
Southern  Nat.  Bank,  ISO  U.  S.  295,  21  Sup.  Ct.  383,  45  L.  Ed.  536. 

Where  stock  stood  in  the  name  of  one  as  cashier  of  another  bank, 
it  was  not  estopped  to  show  that  it  held  the  stock  as  collateral,  in 
the  absence  of  evidence  that  the  insolvent  bank  or  its  creditors  re- 
lied on  the  supposed  ownership.  Frater  v.  Old  Nat.  Bank  of  Provi- 
dence, R.  I.,  101  Fed.  391,  42  C.  C.  A.  133.  See  ''Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  2^8;   Cent.  Dig.  §§  913-931. 

84  Anderson  v.  Philadelphia  Warehouse  Co.,  Ill  U.  S.  479,  4  Sup, 
Ct.  525,  28  L.  Ed.  478.  See,  also,  Rankin  v.  Fidelity  Insurance  Trust 
&  Safe-Deposit  Co.,  189  U.  S.  242,  23  Sup.  Ct.  553,  47  L.  Ed.  792; 
National  Park  Bauk  v.  Harmon,  79  Fed.  891,  25  C.  C.  A.  214,  affirmod 
Harmon  v.  National  Park  Bank,  172  U.  S.  644,  19  Sup.  Ct.  877,  43  L. 

Tiff.Bks.&  B.— 25 


3815  NATIONAL  BANKS  -  (Cll.  1% 

though  in  fact  they  are  not  registered  in  his  name,  he  may  be 

held  liable  as  a  shareholder,®^ 

Trustee 

"Persons  holding  stock  as  executors,  administrators,  guard' 
ians,  or  trustees,  shall  not  be  personally  subject  to  any  liabil- 
ities as  stockholders ;  but  the  estates  and  funds  in  their  hands 
shall  be  liable  in  like  manner,  and  to  the  same  extent  as  the 
testator,  intestate,  ward  or  person  interested  in  such  trust  funds 
would  be,  if  living  and  competent  to  act  and  hold  the  stock  in 
his  own  name."®**  A  trustee,  though  not  appointed  by  will  or 
order  of  court,  is  not  personally  liable  upon  stock  owned  by  his 
cestui  que  trust,  but  standing  in  his  name  as  trustee,  where  he 
has  been  guilty  of  no  fraud,  concealment,  or  negligence,® '^  The 
fact  that  the  trust  estate  is  wiped  out  by  the  insolvency  of  the 
bank  does  not  charge  the  trustee  individually.®®    If  the  stock  is 

Ed.  1182 ;  Wilson  v.  Merchants'  Loan  &  Trust  Co.,  98  Fed.  688,  39  C. 
C,  A.  231;  Hayes  v.  Fidelity  Insurance,  Trust  &  Safe-Deposit  Co. 
(C.  C.)  105  Fed.  160.  See  "Bajiks  and  BanJdng,"  Dec.  Dig.  {Key  Xo.) 
§  ^48;   Cent.  Dig.  §§  913-931. 

8  5  The  pledgee  of  stock  as  collateral  for  a  note,  with  power  of  pub- 
lic or  private  sale  for  the  liquidation  of  the  pledge,  becomes  the  bene- 
ficial owner,  and  as  such  subject  to  the  liability  of  a  stockholder, 
where,  after  the  death  of  the  pledgor,  it  causes  the  stock  to  be  reg- 
istered in  the  name  of  an  employe  with  no  beneficial  interest,  and 
afterwards  indorses  on  the  note  the  supposed  value  of  the  stock  as 
of  the  date  of  the  credit,  and  presents  the  note,  as  reduced  by  the 
amount  of  such  valuation,  to  the  pledgor's  administrator,  who  al- 
lows the  claim  in  this  form.  Ohio  Valley  Nat.  Bank  v.  Hulitt,  204  U. 
S,  162,  27  Sup.  Ct.  179,  51  L.  Ed.  423.  See  "Banks  and  Banking,'' 
Dec.  Dig.  {Key  No.)  §  2J,8;   Cent.  Dig.  §§  913-931. 

8  6  Rev.  St.  U.  S.  §  5152  (U.  S.  Comp.  St.  1901,  p.  34C5), 

8  7  Lucas  V,  Coe  (C,  C.)  86  Fed.  972. 

So  of  a  father,  who  invests  funds  of  his  children  arising  from  an 
investment  of  his  own  money  previously  made  by  him  in  theJr 
names  and  behalf,  who  takes  the  stock  simply  in  his  own  name  as 
"trustee."  Fowler  v.  Gowing,  165  Fed.  891,  91  C,  C,  A.  569.  See 
"Batiks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  248;  Cent.  Dig.  §§  913- 
931. 

8  8  Fowler  v.  Gowing  (C.  C.)  152  Fed,  801.  See  "Banks  and  Bank^ 
ivg,"  Dec.  Dig.  (Key  No.)  §  2.',8;    Cent.  Dig.  §§  913-931. 


§    101)  WHO    ARE    LIABLE    AS   SHAREHOLDERS  387 

registered  in  the  name  of  the  trustee  as  such,  although  he  be' 
simply  described  as  "trustee,"  without  more,  he  is  protected 
from  personal  liability.^®  But  one  appearing  on  tlifei)ooks  to 
be  the  absolute  owner  of  the  stock  is  subject  to  liability,  al- 
though holding  it  as  trustee.^"  \\'here  a  guardian  as  such 
owns  stock,  neither  he  nor  his  ward  are  subject  to  personal 
liability,  but  only  the  estate  of  the  ward  in  his  hands  is  liable.*^ 
Deceased  Stockholders 

The  individual  liability  of  the  stockholders  is  an  essential  ele- 
ment of  the  contract  by  which  they  become  members  of  the 
corporation,  and  therefore  the  obligation  survives  against  the 
personal  representatives  of  a  deceased  stockholder."-     The  es- 

S9  Welles  V.  Larrabee  (G.  C.)  36  Fed.  8GG ;  Lucas  v.  Coe  (C.  C.)  SU 
Fed.  972;  Fowlor  v.  Gowing,  1G5  Fed.  891,  91  C.  C.  A.  509;  Id.  (G. 
C.)  152  Fed.  801. 

One  registered  as  owner,  but  who  holds  in  trust  for  the  real 
owner,  is  not  liable  when  the  other  has  been  adjudged  liable,  though 
nothing  is  realized  on  execution  of  such  judgment.  Yardley  v.  Wil- 
gus  (C.  G.)  56  Fed.  965.  See  "BanJcs  and  Bankinfj,"  Dec.  Dig.  {Key 
No.)  §  2Jf8;   Cent.  Dig.  §§  913-931. 

90  Davis  V.  First  Baptist  Societ.y  of  Essex,  Fed.   Gas.  No.  3,033; 
Kerr  v.  Urie,  SO  Md.  72,  37  Atl.  789,  38  L.  R.  A.  119,  63  Am.  St.  Rep. 
493.     See,  also,  Ilortou  v.  Mercer,  71  Fed.  153,  18  C.  C.  A.  18.     See 
"BanJcs   and  Banking,"  Dec.   Dig.   {Key  No.)  §  248;    Cent.  Dig.  §§ . 
913-931. 

91  Glark  v.  Ogilvie,  111  Ky.  ISl,  63  S.  W.  429.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.)  §  2^8;    Cer^t.  Dig.  §§  913-931. 

9  2  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Gt.  788,  30  L.  Ed.  864. 
See,  also,  Witters  v,  Sowles  (C.  G.)  25  Fed.  168 ;  Parker  v.  Rolnnson, 
71  Fed.  256,  IS  G.  G.  A.  36;  Baker  v.  Beach  (G.  G.)  85  Fed.  830; 
Tourtelot  v.  Fiuke  (G.  G.)  87  Fed.  840;  Brown  v.  Ellis  (D.  G.)  103 
Fed.  834. 

Rev.  St.  U.  S.  §  5152  (U.  S.  Gomp.  St.  1901,  p.  3405),  does  not  af- 
fect the  liability  of  the  estate.  Davis  v.  Weed,  Fed.  Gas.  No.  3,658 ; 
Irons  V.  Manufacturers'  Nat.  Bank  (D.  C.)  21  Fed.  197.  . 

Where  an  administrator,  who  is  also  sole  heir  and  next  of  kiu. 
takes  into  his  possession  bank  stock  belonging  to  the  intestate, 
votes  such  stock,  and  draws  the  dividends,  but  does  not  have  the 
stock  transferred  to  his  name,  he  does  not  thereby  become  personally 
liable  as  owner  of  the  stock  before  his  duties  as  administrator  are 


388  NATIONAL  BANKS  (Ch.  12 

tate  is  liable  to  an  assessment  levied  against  the  executors  in 
consequence  of  a  failure  of  the  bank  after  the  shareholder's 
death. ^^  So  the  widow  and  heirs  of  a  shareholder,  to  whom 
the  probate  court  allots  the  shares  of  stock  in  indivision,  in  pro- 
portion to  their  interest  in  the  estate,  but  who  let  the  stock 
stand  in  the  name  of  the  deceased,  without  any  notice  of  their 
title  to  it,  are  liable  to  assessments  on  the  stock  if  the  bank 
subsequently  becomes  insolvent.®* 
Effect  of  Trap^fer 

The  act  provides  that  the  share  shall  be  transferable  on 
books  of  the  association  in  such  manner  as  may  be  prescribed 
by  the  articles  or  by-laws,  and  that  "every  person  becoming  a 
shareholder  by  such  transfer  shall,  in  proportion  to  his  shares, 
succeed  to  the  rights  and  liabilities  of  the  prior  holder."  ®^  It 
follows  that  a  valid  and  complete  transfer  relieves  the  trans- 
ferror of  liability,  and  substitutes  the  transferee  in  his  place, 
and  that  until  such  transfer  the  prior  holder  is  the  stockholder 
and  liable  for  the  debts  of  that  corporation.®^    Thus,  when  a 

eoded.     In  re  Bingham,  126  N.  Y.  296,  27  N.  E.  1055.     See  "Banks 
and  Banking;'  Dec.  Dig.  {Key  .A'o.)  §  2^8;   Cent.  Dig.  §§  913-931. 

8  3  Wickliam  v.  Hull  (C.  C.)  60  Fed.  326.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  2^8;    Cent.  Dig.  §§  913-931. 

9  4  Matteson  v.  Dent,  176  U.  S.  521,  20  Sup.  Ct.  419,  44  L.  Ed.  571. 
Euforcing  the  whole  amount  of  an  assessment,  to  the  extent  of  the 
distributive  share  received,  against  one  of  the  heirs  or  next  of  kiu 
to  whom  the  stock  has  been  allotted  by  the  probate  court  in  indivi- 
sion, in  proportion  to  their  interest  in  the  estate,  pursuant  to  a  state 
statute,  does  not  violate  any  rights  under  the  federal  statutes.  Mat- 
teson V.  Dent,  supra.    Cf.  Witters  v.  Sowles  (C.  C.)  32  Fed.  130. 

Where  stock  is  bequeathed  to  one  for  life,  with  remainder  over, 
an  assessment  after  the  death  of  testator  is  payable  only  by  the 
beneficiaries  of  the  bequest,  and  testator's  estate  cannot  be  made 
liable.  Blackmore  v.  AVoodward,  71  Fed.  321,  IS  C.  C.  A.  57.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2^8;  Cent.  Dig.  §§  913- 
931. 

9  5  Rev.  St.  U.  S.  §  5139  (U.  S.  Comp.  St.  1901,  p.  3401). 

9  6  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  788,  30  L.  Ed.  864. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  249;  Cent.  Dig.  §§ 
916-918. 


§    101)  WHO    ARE    LIABLE    AS    SHAREHOLDERS  389 

shareholder  sold  his  stock  several  months  before  the  insolvency 
of  the  bank,  but  the  transfer  was  not  registered  on  the  books 
until  the  date  of  the  bank's  failure,  the  shareholder  WcT?  subject 
to  the  statutory  liability."'  But  a  shareholder  who  has  sold  his 
stock  is  not  liable  merely  because  the  transfer  is  not  registered, 
if  he  is  not  in  any  way  responsible  for  the  omission,  but  has 
done  everything  that  a  careful  and  prudent  business  man  could 
reasonably  do  to  effect  a  transfer.^*  Thus,  where  a  sharehold- 
er, before  the  suspension  of  the  bank,  had  made  a  bona  fide 
sale  and  surrendered  his  certificates,  and  delivered  to  the  pres- 
ident of  the  bank  a  power  sufficient  to  effect,  and  intended  to 
eft'ect,  as  that  officer  knew,  a  transfer  on  the  books  to  the  pur- 
chaser, it  was  held  that  a  receiver  could  not  recover  against 
him  for  an  assessment.®" 

In  order  to  relieve  the  transferror  from  liability,  the  transfer 
must  be  to  some  one  capable  of  taking  and  holding  the  stock 
and  assuming  the  transferror's  liability.  A  transfer  to  an  in- 
fant will  not  relieve  the  transferror.^""  Since  a  national  bank 
is  without  power  to  purchase  its  own  stock,  a  sale  and  transfer 
to  the  bank  does  not  relieve  the  transferror.^"^ 

97  Richmond  v.  Irons,  121  U.  S.  27,  27  Snp.  Ct.  788.  30  L.  Ed.  864. 
See  ''Banks  and  Banlcing,"  Dec.  Dig.  (Key  No.)  §  249;  Cent.  Dig.  §§ 
916-91S. 

9  8  Whitney  v.  Butler,  118  U.  S.  655,  7  Sup.  Ct.  61.  30  L.  Ed.  266. 
See  ''Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  249;  Cent.  Dig.  §§ 
916-91 S. 

9  9  AYhitney  v.  Butler,  118  U.  S.  655,  7  Sup.  Ct.  61,  30  L.  Ed.  266. 
See,  also.  Earle  v.  Carson,  188  U.  S.  42,  23  Sup.  Ct.  254,  47  L.  Ed.  , 
373 ;  Hayes  v.  Schoemaker  (C.  C.)  39  Fed.  319 ;  Snyder  v.  Foster,  73 
Fed.  136,  19  C.  C.  A.  406 ;  Earle  v.  Coyle  (C.  C.)  95  Fed.  99 ;  Kimball 
V.  Aspey,  164  Fed.  830,  90  C.  C.  A.  634.  Cf.  Schofield  v.  Twining:  (C. 
C.)  127  Fed.  486.  See  "Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  § 
2.',9;    Cent.  Dig.  §§  916-918. 

looAldrich  v.  Bingham  (D.  C.)  131  Fed.  363.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  249;   Cent.  Dig.  §§  916-918. 

101  See  Johnson  v.  Laflin,  Fed.  Cas.  No.  7,393,  5  Dill.  65,  affirmed 
Johnston  v.  Laflin,  103  U.  S.  800,  20  L.  Ed.  532 ;  ante,  p.  249.  See 
"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  2//9;  Cent.  Dig.  §§  916- 
918. 


390  NATIONAL   BANKS  (Ch.  12 

-While  a  shareholder  has  generally  a  right  to  transfer  his 
shares,  and  thereby  disconnect  himself  from  the  corporation, 
and  from  responsibility  on  account  of  it,  there  are  limits  to 
that  right.  A  transfer,  which  is  merely  colorable — that  is, 
where  the  transferee  is  a  mere  tool  pf  the  transferror — so  that 
as  between  the  transferror  and  the  transferee  there  is  no  real 
transfer,  as  where  the  transferee  is  bound  to  retransfer  on  re- 
quest and  the  benefits  of  ownership  continue  in  the  transferror, 
does  not  relieve  the  transferror  of  his  liability.^''-  Again  even 
if  the  transfer  is  out  and  out,  if  the  stockholder,  knowing  or 
having  good  reason  to  believe  that  the  bank  is  insolvent,  col- 
ludes with  an  irresponsible  person,  with  design  to  substitute 
the  latter  in  his  place,  and  thus  escape  individual  liability,  trans- 
fers his  shares  to  such  person,  the  transaction  will  be  deemed 
a  fraud  on  creditors,  and  the  transferror  will  be  held  liable.^"^ 

102  Germania  Nat.  Bank  v.  Case,  99  U.  S.  628,  25  L.  Ed.  448;  Mc- 
Bouald  V.  Dewey,  202  U.  S.  510,  26  Sup.  Ct.  731,  50  L.  Ed.  1128.  See, 
also,  Foster  v.  Lincoln's  Ex'r,  79  Fed.  170,  24  C.  C.  A.  470. 

'  Where  an  executor,  without  consideration,  transfers  banli  stock  in 
trust  for  his  own  benefit,  and  to  enable  the  transferee  to  become  a 
dii'ector  of  the  bank,  the  title,  for  the  purposes  of  assessment,  re- 
mains with  the  executor.  Witters  v.  Sowles  (C.  C.)  32  Fed.  130.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  A'o.)  §  2-',9;  Cent.  Dig.  §§  916- 
918. 

103  Bowden  v.  Johnson,  107  U.  S.  251,  2  Sup.  Ct.  240,  27  L.  Ed.  386. 
Reasonable  ground  to  apprehend  failure  is  enough.     Cox  v.  3Ion- 

tague,  78  Fed.  845,  24  C.  C.  A.  364. 

Knowledge  that  the  bank's  reserve  is  below  the  limit  fixed  by  Rev. 
St.  U.  S.  §  5191  (U.  S.  Comp.  St.  1901,  p.  3486),  is  not  enough  to  avoid 
the  transaction  in  the  event  of  future  suspension.  A  bona  fide  sale 
is  not  a  fraud  on  creditors  because  the  bank  is  thea  insolvent,  if 
the  fact  be  unknown  to  the  seller.  Earle  v.  Carson,  188  U.  S.  42. 
23  Sup.  Ct.  2.54,  47  L.  Ed.  373.  See.  also,  Vandagrift  v.  Rich  Hill 
Bank,  163  Fed.  823,  90  C.  C.  A.  129 ;  Fowler  v.  Crouse,  175  Fed.  646. 
99  C.   C.  A.  200. 

A  transfer  by  way  of  gift,  although  to  an  irresponsible  person, 
cannot  be  set  aside,  if  made  in  good  faith  and  without  knowledge  of 
the  bank's  failing  condition.  Sykes  v.  HoUoway  (C.  C.)  81  Fed.  432. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §  2//9;  Cent.  Dig.  §§ 
916-918. 


§    101)  WHO    ARE    LIABLE    AS    SIIAKEIIOLDERS  391 

And  the  rule  has  been  applied  even  where  the  transferee  is 
solvent.  "One  who  holds  such  shares  (the  bank  bein.t,^  at  the 
time  insolvent)  cannot  escape  the  individual  liability^-i-mposed 
by  the  statute  by  transferring  his  stock  with  the  intent  simply 
to  avoid  that  liability,  knowing  or  having  reason  to  believe,  at 
the  time  of  the  transfer  on  the  books  of  the  bank,  that  it  is  in- 
solvent or  about  to  fail.  A  transfer  with  such  intent  and  under 
such  circumstances  is  a  fraud  upon  the  creditors  of  the  bank, 
and  may  be  treated  by  the  receiver  as  inoperative  between  the 
transferror  and  himself,  and  the  former  held  liable  as  a  share- 
holder without  reference  to  the  financial  condition  of  the  trans- 
feree." 1°-*  The  solvency  of  the  transferee  is  pertinent  in  show- 
ing that  no  damage  could  have  resulted  to, the  creditors  by  the 
transfer;  but  one  who  relies  upon  a  sale  of  shares  made  with 
knowledge  of  the  bank's  insolvency  to  escape  his  statutory  lia- 
bility has  the  burd,en  of  proving  that  the  vendee  was  financially 
responsible  to  the  extent  of  the  assessment.  Moreover,  one 
who,  with  knowdedge  of  the  bank's  insolvency,  transfers  his 
shares  to  an  irresponsible  vendee,  with  intent  to  evade  his  statu- 
tory liability,  can  be  held  liable  only  for  the  unsatisfied  debts 
existing  when  the  fraudulent  transfer  was  made.^"^ 

Although  the  transfer  is  such  that  the  transferror  remains 
liable,  the  transferee,  having  voluntarily  assumed  the  position 
of  a  shareholder,  is  also  liable. ^^^    After  the  ban|<:  has  become 

104  Stuart  V.  Haydeu,  169  U.  S.  1,  IS  Sup.  Ct.  274.  42  L.  Ed.  639. 

The  insolvency  of  the  purchaser  of  shares  of  a  bank  which  sub- 
sequently suspends  does  not  render  the  sale  void,  as  in  fraud  of  the 
bank's  creditors,  where  the  insolvency  of  the  purchaser  is  unknown 
to  the  seller.  Earle  v.  Carson.  ISS  U.  S.  42.  2.S  Sup.  Ct.  254,  47  L. 
Ed.  373.  See  "Banks  and  Banking,"  Dec.  Dir/.  (Key  No.)  §  2.}9; 
Cent.  Dig.  §§  916-918. 

105  McDonald  v.  Dewey,  202  U.  S.  510,  20  Sup.  Ct.  731,  50  L.  Ed. 
1128.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2^9;  Cent. 
Dig.  §§  916-918. 

lOG  Foster  v.  Lincoln  (C.  C.)  74  Fed.  3S2 ;  Baker  v.  Reeves  (C.  C.) 
85  Fed.  S37.  See,  also,  Bowden  v.  Johnson,  107  U.  S.  231.  2  Sup. 
Ct.  246,  27  L.  Ed.  386.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
-Yo.)  §  2VJ;    Cent.  Dig.  §§  916-918. 


392  NATIONAL  BANKS  (Ch.  12 

insolvent  and  closed  its  doors,  the  liability  of  shareholders  is 
so  far  fixed  that  any  transfer  is  inoperative  as  against  the  cred- 
itors.^" 


ENFORCEMENT  OF  SHAREHOLDERS'  LIABILITY 

102.  In  case  of  the  involuntary  liquidation  of  the  associa- 
tion, the  liability  of  the  shareholders  is  enforced 
through  a  receiver  appointed  by  and  under  the  di- 
rection of  the  comptroller  of  the  currency.  In  case 
of  voluntary  liquidation,  the  liability  may  be  en- 
forced by  creditors'  bill,  or  by  a  receiver  appointed 
by  a  court  of  equity  to  liquidate  the  debts  of  the 
association. 

Involuntary  Liquidation 

In  case  of  the  involuntary  liquidation  of  the  association,  the 
personal  liability  of  the  shareholders  is  enforced  through  a  re- 
ceiver appointed  by  the  comptroller  of  the  currency  and  acting 
under  his  direction. ^"^  It  is  for  the  receiver  to  decide  when 
proceedings  are  necessary  to  enforce  the  liability  and  to  what 
extent  it  shall  be  enforced,  and  in  an  action  to  enforce  it  such 
determination  must  be  averred  and  proved.  The  creditors  of 
the  bank  cannot  proceed  directly  in  their  own  names,  nor  are 
they  proper  parties  to  the  suit.  When  less  than  the  entire  lia- 
bility of  stockholders  is  sought  to  be  enforced,  proceedings  may 
be  had  in  equity,  and  an  interlocutory  decree  may  be  taken  for 
contribution.    When  contribution  only  is  sought,  all  the  stock- 

107  Irons  V.  Manufacturers'  Nat.  Bank  (C.  C.)  17  Fed.  308.  See 
"Banks  and  Banking"  Dec.  Dig.  {Key  No.)  §  2^9;  Cent.  Di(r>%%  916- 
918. 

108.  Rev.  St.  U.  S.  §  5234  (U.  S.  Comp.  St.  1901,  p.  3.507);  Act  June 
30,  1876,  c.  im,  §  1,  19  Stat.  63  (U.  S.  Comp.  St.  1901,  p.  3509) ;  Act 
Aug.  3,  1892,  c.  360.  27  Stat.  .345  ru.  S.  Comp.  St.  1901,  p.  3513) ;  Act 
March  2,  1897,  c.  354,  29  Stat.  600  (U.  S.  Comp.  St.  1901,  p.  3514); 
post,  p.  413. 


§    102)       ENFORCEMENT  OF  SHA'IEHOLDERS'  LIABILITY  393 

holders  who  can  be  reached  by  process  of  the  court  may  be 
joined,  and  it  will  be  no  objection  that  there  are  others  beyond 
the  jurisdiction  who  cannot  be  reached. ^'>''  When  tli&JDrder  of 
the  comptroller  is  to  enforce  the  full  amount  of  the  liability — 
that  is,  an  amount  equal  to  the  par  of  the  stock — the  action 
must  be  at  law.^^"  Actions  by  the  receiver  for  assessments  on 
the  stock  are  subject  to  the  state  statutes  of  limitations. ^^^ 

The  order  of  the  comptroller,  determining  to  what  extent 
the  liability  shall  be  enforced,  is  conclusive  on  the  stockholders, 
and  cannot  be  controverted  by  them  in  a  suit  for  the  recovery 

109  Kennedy  v.  Gibson,  8  Wall.  498,  19  L.  Ed.  476.  See,  also,  Na- 
tional Bank  of  Metropolis  v.  Kennedy,  17  Wall.  19,  21  L.  Ed.  554. 

The  comptroller  may  appoint  a  receiver  for  an  insolvent  bank,  or 
make  a  ratable  assessment  on  the  stockholders,  without  a  prior  judi- 
cial determination  of  the  necessity  for  a  receiver  or  o*  the  existence 
of  the  liabilities  of  the  bank.  Rev.  St.  §§  5151,  523^,  (U.  S.  Comp.  St. 
1901.  pp.  34Gr-.  3507),  empowering  the  comptroller  to  appoint  receivers 
for  insolvent  banks,  and  to  make  ratable  assess^aients  upon  stock- 
holders, does  not  vest  in  him  a  judicial  power, 'in  violation  of  the 
constitution.  Bushnell  v.  Leland,  164  U.  S.  684,  17  Sup.  Ct.  209,  41  L. 
Ed.  59S.    - 

As  to  sufficiency  of  proof  of  comptroller's  determination  to  enforce 
liability,  see  Bowden  v.  Johnson.  107  U.  S.  2ol,  2  Sup.  Ct.  246,  27  L. 
Ed.  386. 

As  to  sufficiency  of  pleading  comptroller's  determination,  see  Welles 
V.  Stout  (C.  C.)  38  Fed.  67;  Young  v.  Wempe  (C.  C.)  46  Fed.  354; 
Xead  V.  Wall  (C.  C.)  70  Fed.  806;  O'Connor  v.  Witherby,  111  Cal. 
523,  44  Pac.  227.  See  "Banks  and  Panking,"  Dec.  Dig.  (Key  Ao.)  § 
250;    Cent.  Dig.  §§  932-0J,3. 

110  Kennedy  v.  Gibson.  8  Wall.  498,  19  L.  Ed.  476;  Casey  v.  Galli. 
94  U.  S.  673,  24  L.  Ed.  108.  See,  also.  Young  v.  Wempe  (C.  C.)  46  Fed. 
354.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key.  A'o.;  §  250;  Cent. 
Dig.   §§  932-9J,3. 

111  Butler  V.  Poole  (C.  C.)  44  Fed.  586;  Price  v.  Yates,  Fed.  Cas. 
No.  11,418. 

As  to  the  applicability  of  particular  statutory  provisions,  see  Mc- 
Donald V.  Thompson,  184  U.  S.  71,  22  Sup.  Ct.  297,  46  L.  Ed.  437; 
McClaine  v.  Rankin,  197  U.  S.  154,  25  Sup.  Ct.  410,  49  L.  Ed.  702; 
King  V.  Armstrong,  9  Cal.  App.  368,  99  Pac.  527.  See  "Banks  and 
Banking,"  Dec.  Dig.  (Key  No.j  §  250;  Cent.  Dig.  §§  932-943. 


394  NATIONAL  BANKS  (Ch.  12 

thereof."'  But  the  comptroller  may  make  a  second  assessment 
upon  the  shareholders,  where  the  first  proves  insufficient  to  pay 
the  debts  and  liabilities  of  the  bank.^^^  The  statute  of  limita- 
tions does  not  commence  to  run  against  the  enforcement  of  the 
entire  liability,  or  of  any  particular  portion  thereof,  until  the 
comptroller  has  called  the  entire  liability  or  the  particular  por- 
tion of  it  in  issue. ^^* 

A  payment  of  an  assessment  made  by  a  bank  on  its  share- 
holders in  order  to  continue  in  business  and  avoid  liquidation 
is  not  a  discharge  of  the  shareholder's  liability  for  the  debts 
of  the  bank,  and  cannot  be  applied  thereto. ^^'  Nor  can  a  stock- 
holder, who  is  also  a  creditor  of  the  bank,  offset  against  the 
amount  of  an  assessment  ordered  by  the  comptroller  an  in- 
debtedness of  the  bank  to  him,  but  he  must  come  in  with  the 
ether  general  creditors. ^^^ 

112  Kennedy  v.  Gibson,  8  Wall.  498,  19  L.  Ed.  476;    Casey  v.  Galli, 

94  U.  S.  673,  24  L.  Ed.  168.  See,  also,  Aldrich  v.  Yates  (C.  C.)  95 
Fed.  78 ;  Deweese  v.  Smith,  106  Fed.  438,  45  C.  C.  A.  408,  66  L.  R. 
A.  971. 

The  determination  of  the  comptroller  does  not  conclude  stockhold- 
ers as  to  the  validity  of  the  debts  to  pay  which  the  assessment  is 
made.  Moss  v.  Whitzel  (C.  C.)  108  Fed.  579.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  250;    Cent.  Dig.  §§  932-943. 

113  Studebaker  v.  Perry,  184  U.  S.  258,  22  Sup.  Ct.  463,  46  L.  Ed. 
528.  See  ''Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §  250;  Cent. 
Dig.  §§  932~9-i3. 

114  Deweese  v.  Smith,  106  Fed.  438,  45  C.  C.  A.  408,  66  L,  R.  A. 
971.  See,  also,  McDonald  v.  Thompson,  184  U.  S.  71,  22  Sup.  Ct.  297, 
46  L.  Ed.  437;  Thompson  v.  German  Ins.  Co.  (C.  C.)  76  Fed.  892; 
Howarth  v.  Ellwanger  (C.  C.)  86  Fed.  54;    Aldrich  v.  Yates  (C.  C.) 

95  Fed.  78.  See  ''Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §  250; 
Cent.  Dig.  §?  932-9^3. 

115  Delano  v.  Butler,  118  U.  S.  634,  7  Sup.  Ct.  39,  30  L.  Ed.  260. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2^9;  Cent.  Dig.  § 
926. 

116  Hobart  v.  Gould  (D.  C.)  8  Fed.  57;  Wingate  v.  Orchard,  75  Fed. 
241,  21  C.  C.  A.  315.  See,  also,  Witters  v.  Sowles  (C.  C.)  32  Fed.  130 ; 
Sowles  V.  Witters  (C.  C.)  39  Fed.  403.  See  "Banks  and  Banking," 
T)(r:  Dig.  {Key  No.)  §  2^9;    Cent.  Dig.  §  929. 


§    102)       ENFORCEJiENT  OF  SHAREIIOLDEUS'  LIABILITY  395 

Voluntary  Liquidation 

In  case  of  the  voluntary  liquidation  of  the  association,  no 
express  provision  was  originally  made  by  the  Natjgnal  Bank 
Act  for  the  enforcement  of  the  liabilities  of  the  shareholders. 
This  omission  was  supplied  by  the  act  of  June  30,  1876,  which 
provides  that  the  liabilities  of  the- shareholders  may  be  enforced 
by  any  creditor  by  bill  in  equity  in  the  nature  of  a  creditors' 
bill,  brought  by  him  on  behalf  of  himself  and  all  other  credi- 
tors against  the  shareholders,  in  any  court  of  the  United  States 
having  original  jurisdiction  in  equity  for  the  district  in  which 
the  association  may  have  been  located  or  established. ^^^  It 
has  been  held,  however,  that  the  remedy  of  a  creditors'  suit, 
provided  by  this  act,  is  cumulative,  and  not  exclusive. ^^®     Un- 

iiT  Rev.  St.  U.  S.  §  5220  (U.  S.  Coiiip.  St.  1901,  p.  3503);  Act  June 
30,  1876,  c.  15G,  §  2,  19  Stat.  63  (U.  S.  Comp.  St.  1901,  p.  3509) ;  post, 
P,  411. 

For  the  history  of  the  legislation,  see  Richmond  v.  Irons,  121  U. 
S.  27.  7  Sup.  Ct.  7SS,  30  L.  Ed.  864. 

Act  June  30,  1876,  was  not  repealed  by  Act  July  12,  1882,  c.  290, 
§  4,  22  Stat.  163  (U.  S.  Comp.  St.  1901.  p.  3458),  providing  that 
the  jurisdiction  for  suits  by  or  against  any  national  bank,  except 
suits  between  them  and  the  United  States,  shall  be  the  same  as  the 
jurisdiction  for  suits  by  or  against  state  banks,  nor  by  Act  Aug.  13, 
1888,  c.  8G6,  §  4,  25  Stat.  436  (U.  S.  Conip.  St.  1901,  p.  514),  declaring 
that  all  national  banks,  for  the  purpose  of  actions  by  or  against 
them,  shall,  be  deemed  citizens  of  the  states  in  which  they  are  re- 
spectively located,  etc.,  as  such  latter  sections  relate  exclusively  to 
suits  by  or  against  banking  associations  themselves.  George  v.  Wal- 
lace, 135  Fed.  286,  68  C.  C.  A.  40,  affirmed  Wyman  v.  Wallace,  201  U. 
S.  230,  26  Sup.  Ct.  495,  50  L.  Ed.  738. 

Valid  obligations  of  a  national  bank  may,  after  voluntary  liquida- 
tion, be  enforced  against  a  stockholder  who  voted  against  the  resolu- 
tions looking  towards  such  liquidation,  where  the  requisite  amount 
of  stock  was  voted  in  favor  of  that  course.  Poppleton  v.  Wallace, 
201  U.  S.  245,  26  Sup.  Ct.  298,  50  L.  Ed.  743.  See,  also,  Wyman  v. 
Wallace,  201  U.  S.  230,  26  Sup.  Ct.  495,  50  L.  Ed.  738.  See  ''Banks 
and  Banking;'  Dec.  Dig..  {Keg  No.)  §  250;   Cent.  Dig.  §§  932-939. 

118  King  V.  Pomeroy,  121  Fed.  287,  58  C.  C.  A.  209.  See,  also,  Rich- 
mond V.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  788,  30  L.  Ed.  864. 

The  contrary  is  declared  in  Williamson  v.  American  Bank,  115  Fed. 


398  NATIONAL  BANKS  (Ck.  12 

d'er  the  original  act,  a  federal  court  sitting  in  equity  had  juris- 
diction in  a  proper  case  to  appoint  a  receiver  to  enforce  the 
liabilities  of  stockholders  of  banks  in  voluntary  liquidation. 
Where  a  court  of  equity  appoints  a  receiver  to  liquidate  the 
debts  of  the  bank  in  voluntary  liquidation,  no  action  of  the 
comptroller  is  required  to  empower  the  receiver  to  enforce  the 
liability  of  the  shareholders,  and  the  court  has  plenary  power 
to  ascertain  the  necessity  of  enforcing  the  liability,  and  to  di- 
rect its  receiver  to  collect  it.^^'  The  officers  of  a  bank  which 
has  gone  into  liquidation  have  no  authority  to  bind  the  stock- 
holders by  the  transaction  of  any  business  except  that  neces- 
sarily involved  in  winding  up  its  afifairs,^^** 


OFFICERS— IN  GENERAL 

103.  The  affairs  of  a  national  bank  are  managed  by  the  di- 
rectors, who  appoint  the  president,  cashier,  and 
other  officers. 

A  national  banking  association  has  power  to  elect  or  appoint 
directors,  and, by  its  board  of  directors  to  appoint  a  president, 
vice  president,  cashier,  and  other  officers,  define  their  duties, 
require  bonds  of  them  and  fix  the  penalty  thereof,  dismiss  such 

793,  52  C.  C.  A.  1.    See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
250;   Cent.  Dig.  §§  932-939. 

119  King  V.  Pomeroy,  121  Fed.  287,  58  C.  C.  A.  209. 

The  statute  of  limitations  does  not  run  while  proper  liquidation 
proceedings  are  pending  in  a  court  of  equity.  The  liability  does  not 
mature  until  the  court  ascertains  the.  necessity  of  enforcement,  de- 
termines the  amount  which  the  shareholders  must  pay,  and  fixes 
the  time  of  payment ;  and  the  receiver's  cause  of  action  does  not 
accrue  until  the  liability  thus  matures.  King  v.  Pomeroy,  supra. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  250;  Cent.  Dig.  §§ 
932-939. 

120  Schrader  v.  Manufacturers'  Nat.  Bank,  133  U.  S.  67,  10  Sup. 
Ct.  238,  33  L.  Ed.  564.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  250;   Cent.  Dig.  §§  932-939. 


§§    104-105)  CIVIL   LIABILITY    OF    OFFICERS  397 

officers  at  pleasure,  and  appoint  others  to  fill  their  places.^ -^ 
The  affairs  of  the  association  are  to  be  mana.i^ecl  by  not  less 
than  five  directors,  elected  at  the  shareholders'  meetings,  who 
hold  office  for  one  year  and  until  their  successors  are  elected 
and  have  qualified. ^-^  Certain  qualifications  as  to  citizenship 
and  residence  are  prescribed,  and  each  director  must  own  a 
certain  number  of  shares  of  the  capital  stock,' -^  and  must  take 
a  prescribed  oath.^-*  Vacancies  are  filled  by  appointment  of 
the  remaining  directors. ^^"^  The  president  must  be  a  direc- 
tor.'-° 

CIVIL  LIABILITY  OF  OFFICERS 

104.  AT  COMMON  LAW— The  directors  and  other  offi- 
cers of  the  association  are  liable  to  it  at  common 
law  for  losses  sustained  by  misapplication  of  the 
bank's  funds,  or  by  reason  of  negligence  or  inat- 

121  Rev.  St.  U.  S.  §  5136  (U.  S.  Comp.  St.  1901,  p.  3455). 
Directors  have  discretion  whether  or  not  to  require  bonds.    Robin- 
son V.  Hall  (C.  C.)  .59  Fed.  G48. 

The  office  of  cashier  is  not  an  annual  office,  but  the  term  continues 
till  resisnation,  removal,  or  appointment  of  a  successor,  and  a  by-law 
providing  that  the  term  shall  be  for  one  year  is  nui,'atory.  Wester- 
velt  V.  Mohrenstecher,  76  Fed.  118,,  22  C.  C.  A.  93,  34  L.  R.  A.  477. 
See  "Banks  and  Banking,"  Dec.  Big.  {Key  'No.)  §  251;  Cent.  Dig.  §§ 
9JtO-9J,3,  9Jtl.  ' 

122  Rev.  St.  U.  S.  §  5145  (U.  S.  Comp.  St.  1901,  p.  3463). 

A  director  may  resign  within  the  year.  Briggs  v.  Spaulding,  141 
U.  S.  132,  11  Sup.  Ct.  924,  35  L.  Ed.  662.  See  ''Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  251;   Cent.  Dig.  §§  9.iO-9-',3. 

123  Rev.  St.  U.  S.  §  5146,  amended  by  Act  Feb.  28,  1905,  c.  1163,  33 
Stat.  818  (U.  S.  Comp.  St.  Supp,  1909,  p.  1318). 

A  transferee  of  stock,  after  expiration  of  the  term  of  the  char- 
ter, is  not  a  stockholder,  and  is  ineligible  as  director.  Richards  v. 
Attleborough  Nat.  Bank,  148  Mass.  187,  19  N.  E.  353,  1  L.  R.  A.  781. 
See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  251;  Cent.  Dig.  §§ 
9JtO-9Jt3. 

121  Rev.  St.  U.  S.  §  5147  (U.  S.  Comp.  St.  1901,  p.  3464). 

125  Rev.  St.  U.  S.  §  5148  (U.  S.  Comp.  St.  1901,  p.  3464). 

120  Rev.  St.  U.  S.  §  5150  (U.  S.  Comp.  St.  1901,  p.  3465). 


398  NATIONAL  BANKS  (Ch.  12 

tention  to  their  duties,  as  in  the  case  of  other  bank- 
ing corporations ;  and  such  liability  to  the  associ- 
ation may  be  enforced  in  the  same  manner,  by  the 
association  or  by  a  receiver,  and,  in  proper  cases, 
by  the  shareholders,  as  well  as  by  creditors,  when 
the  association  is  insolvent. 

105.  STATUTORY  LIABILITY— If  the  directors  know- 
ingly violate,  or  knowingly  permit  any  of  the  offi- 
cers, servants,  or  agents  of  the  association  to  vio- 
late, any  of  the  provisions  of  the  National  Bank 
Act,  every  director  who  participated  in  or  assented 
to  such  violation  is  liable  for  all  damages  which 
the  association,  its  shareholders,  or  any  other  per- 
son sustains  in  consequence  thereof.  Such  liability 
may  be  enforced  by  the  association,  or  by  a  re- 
ceiver, and,  it  seems,  in  proper  cases,  by  the  share- 
holders, as  well  as  by  creditors,  when  the  asso- 
ciation is  insolvent. 

Common-Lazv  Liability 

As  we  have  seen,  the  directors  and  other  officers  of  a  nation- 
al bank  are  liable  to  it  at  common  law  for  losses  sustained  by 
reason  of  misapplication  of  the  bank's  funds,  or  by  reason  of 
negligence  and  inattention  to  the  duties. ^^'^ 

Statutory  Liability 

The  National  Bank  Act  provides  that  if  the  directors  shall 
knowingly  violate  or  knowingly  permit  any  of  the  officers,  serv- 
ants, or  agents  of  the  association  to  violate  any  of  the  provi- 
sions of  the  title,  all  the  rights,  privileges,  and  franchises  of 
the  association  shall  thereby  be  forfeited,  the  violation  to  be 
determined  and  adjudged  by  a  proper  circuit,  district,  or  ter- 
ritorial court  of  the  United  States,  in  a  suit  brought  for  that 
purpose  by  the  comptroller  of  the  currency,  in  his  own  name, 
before  the  association  shall  be  declared  dissolved,  and  that,  in 

127  Ante,  p.  20(1. 


§§    104-105)  CIVIL    LIABILITY    OF    OFFICERS  399 

cases  of  such  violation,  every  director  who  participated  in  or 
assented  to  the  same  shall  be  held  liable  in  his  personal  and 
individual  capacity  for  all  damages  which  the  association,  its 
shareholders,  or  any  other  person,  shall  have  sustained  in 
consequence  of  such  violation.^-*  Thus,  by  reason  of  the  stat- 
ute^ the  directors  may  be  held  when  they  knowingly  violate  or 
permit  the  violation  of  the  provisions  of  the  act  in  respect  to 
excessive  loans,^-"-^  the  increase  of  the  capital, ^^*'  the  making 
of  reports  of  the  bank's  financial  condition,^"  and  the  like. 

This  statutory  liability  of  the  directors  is  not  exclusive  of 
the  common-law  liability.  But  the  act  imposes  upon  directors 
duties  w^hich  would  not  rest  upon  them  at  common  law,  and 
the  section  which  makes  them  liable  for  losses  resulting  from 
the  violation  of  duties  expressly  imposed,  and  which  thus  com- 

128  Rev.  St.  U.  S.  §  52.39  (U.  S.  Comp.  St.  1901.  p.  351.5). 

129  Witters  v.  Sowles  (C.  C.)  43  Fed.  405;  City  Nat.  Bank  of  Man- 
gum  V.  Crow,  27  Okl.  107,  111  Pac.  210.  Cf.  Emerson  v.  Gaither,  103 
Md.  564,  64  Atl.  26,  8  L.  R.  A.  (N.  S.)  738.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §§  258,  254;   Cent.  Dig,  §§  9U-9-i9. 

130  Cockrill  v.  Abeles.  86  Fed.  505,  30  C.  C.  A.  223.  See  "Banks 
and  Banking,"  Dec.  Dig.  (Keg  A'o.)  §  253;    Cent.  Dig.  §§  9-'i/f-9-'i9. 

131  Yates  V.  Jones  Nat.  Bank.  200  U.  S.  158,  27  Sup.  Ct.  638,  51  L. 
Ed.  1002. 

Directors  may  be  liable  to  a  common-law  action  of  deceit  for  false 
representations.  Prescott  v.  Haughey  (C.  C.)  65  Fed.  653.  Cf.  Yates 
V.  Jones  Nat.  Bank,  supra;  Merchants'  Nat.  Bank  v.  Armstrong  (C. 
C.)  05  Fed.  932. 

Directors  who  have  attested  to  be  correct  an  official  report  of  the 
bank's  condition,  which  included,  at  their  full  face,  as  part  of  the 
bank's  resources,  assets  which  they  had  been  informed  by  the 
comptroller  were  doubtful,  and  for  the  collection,  or  removal  from 
the  bank,  of  which  immediate  steps  should  be  taken,  are  liable  to 
one  who,  on  the  strength  of  the  report,  bought  stock  of  the  bank, 
for  the  depreciation  thereof  by  reason  of  the  shrinkage  in  the  value 
of  the  specific  assets,  but  not  for  its  depreciation  from  impairment, 
then  unknown  to  the  directors,  of  other  assets.  Taylor  v.  Thomas, 
124  App.  Div.  53,  108  N.  Y.  Supp.  454,  aflirmed  195  N.  Y.  590,  89  N. 
E.  1113.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §  253;  Cent. 
Dig.  §§  9iJ,-9W. 


400  NATIO>-AL  BANKS  (Ch.  13 

prehends  all  the  express  commands  to  do  and  not  to  do,  as 
to  directors,  affords  the  exclusive  rule  by  which  to  measure 
the  right  to  recover  damages  therefor.  "That  the  words  'shall 
know'ingly  violate,  or  knowingly  permit,'  *  *  *  were  in- 
tended to  express  the  rule  of  conduct  which  the  statute  estab- 
lished as  a  prerequisite  to  the  liability  for  a  violation  of  the 
express  provisions  of  the  title  relating  to  national  banks,  is 
additionally  shown  by  the  oath  which  a  director  is  required  to 
take,  wherein  he  swears  that  he  will,  so  far  as  the  duty  de- 
volves upon  him,  diligently  and  honestly  administer  the  affairs 
of  the  association,  and  will  not  knowingly  violate,  or  willingly 
permit  to  be  violated,  any  of  the  provisions  of  this  title. 
*  *  *  In  other  words,  as  the  statute  does  not  relieve  the 
directors  from  the  common-law  duty  to  be  honest  and  diligent, 
the  oath  exacted  responds  to  such  requirements.  But  as,  on  the 
other  hand,  the  statute  imposes  certain  express  duties,  and 
makes  a  knowing  violation  of  such  commands  the  test  of  civil 
liability,  the  oath  in  this  regard  also  corresponds  to  the  re- 
quirements of  the  statute  by  the  promise  not  to  knowingly  vio- 
late, or  w^illingly  permit  to  be  violated,  any  of  the  provisions 
of  this  title."  "2 

Enforcement — Common-Law  Liability 

For  a  violation  of  the  common-law  liability  of  the  directors 
and  other  officers,  whereby  the  corporation  has  suffered  loss, 
the  right  of  action  is  primarily  in  the  corporation,  for  the  in- 

132  Yates  V.  Jones  Nat.  Bank,  206  U.  S.  158,  27  Sup.  Ct.  638,  51  L. 
Ed.  1002.  See,  also,  Yates  v,  Utica  Bank.  206  U.  S.  181,  27  Sup.  Ct. 
646,  51  L.  Ed.  1015 ;  Allen  v.  Luke  (C.  C.)  163  Fed.  1018. 

Directors,  who  merely  negligently  participated  in  or  assented  to 
the  false  representations  as  to  the  bank's  financial  condition  con- 
tained in  the  official  report  to  the  comptroller,  made  and  published 
conformably  to  Rev.  St.  U.  S.  §  5211  (U.  S.  Comp.  St.  1901,  p.  3498), 
cannot  be  held  civilly  liable  to  any  one  deceived  to  his  injury  by 
such  report,  since  the  exclusive  test  of  such  liability  is  furnished  by 
section  5239  (page  3515),  which  makes  a  knowing  violation  of  the 
provisions   of   the  title   a  prerequisite   to   such   liability.     Yates   v. 


§§    104-105)  CIVIL    LIAHILITY    OF   OFFICKHS  401 

jury  to  it,  and  not  in  the  stockholders/^'  And!  if  a  receiver 
has  been  appointed,  the  right  of  action  is  primarily  in  the  rc- 
ceiver.^^*  But  if  the  bank  is  still  in  the  control  of  the  di- 
rectors, and  they  cannot  or  will  not  institute  suit  in  the  name 
of  the  corporation,  the  stockholders  may  sue  in  their  own 
names,  making  the  corporation  defendant ;  and  if  stockholders 
are  so  numerous  as  to  render  it  inconvenient  to  bring  them  all 
before  the  court,  a  part  may  file  a  bill  in  equity  in  behalf  of 
themselves  and  all  other  stockholders  similarly  situated. ^^^ 
Where  the  bank  is  insolvent,  and  the  bank's  officers,  the  re- 
ceiver, and  the  comptroller  of  the  currency  have  all  refused  to 
bring  suit,  a  stockholder  as  a  representailve  stockholder,  may 
in  a  state  court  bring  suit  against  the  directors  or  other  of- 
ficers to  recover  money  lost  through  their  negligence  or  dis- 
honesty.^^® And  it  seems  that  creditors  of  the  bank,  if  it 
were  insolvent,  in  a  proper  case  could  enforce  the  liability  to 
the  bank."^ 

Statutory  Liability 

As  in  the  case  of  the  common-law  liability,  the  right  of  ac- 
tion against  the  directors  upon  the  statutory  liability  for  a  loss 


Jones  Nat.  Bank,  supra.  See  ''Banks  and  Banlcing,"  Dec.  Dig.  (Key 
No.)  §§  25S,  25 J^;  Cent.  Dig.  §§  OU-957. 

3  3S  Conway  v.  ITalsey.  44  N.  J.  Law,  462;  ante,  p.  304.  Sec 
"Banks  and  Banking"  Dec.  Dig.  {Key  No.)  §  254;  Cent.  Dig.  §§ 
950-957. 

134  Howe  V.  Barney  (C.  C.)  45  Fed.  668;  Movius  v.  Lee  (C.  C.)  30 
Fed.  298 ;  Cockrill  v.  Abeles,  86  Fed.  505,  30  C.  C.  A.  223.  See  "Banks 
and  Banking."  Dec.  Dig.  (Key  No.)  §  25//;  Cent.  Dig.  §§  950-957. 

i35Ackerman  v.  Halsey,  37  N.  J.  Eq.  356.  See  Brinckerhoff  v, 
Bostwick,  88  N.  Y.  52.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  25',;  Cent.  Dig.  §§  950-957. 

130  Ex  parte  Chetwood,  165  U.  S.  443,  17  Sup.  Ct.  385,  41  L.  Ed. 
782. 

It  is  not  neeessai'y  to  allege  a  direction  from  the  comptroller,  or 
a  demand  upon  him  and  refusal  to  direct  the  receiver  to  sue. 
Brinckerhoff  v.  Bostwick,  88  N.  Y.  52.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §  25^;  Cent.  Dig.  §§  950-957. 

137  Ante,  p.  304, 

TIFF.BKS.&  B.— 26 


402  NATIONAL  BANKS  (Ch.  12 

resulting  to  the  bank  or  its  stockholders  or  creditors  is  prima- 
rily in  the  bank.^^^  If  a  receiver  has  been  appointed,  he  may 
sue.^^®  A  creditor  of  an  insolvent  bank,  which  has  passed  into 
the  hands  of  a  receiver,  cannot  maintain  an  action,  since  the 
liability  is  an  asset  of  the  bank,  and  must  be  enforced  by  the 
receiver  for  the  benefit  of  all  the  creditors.^*"  It  seems  that  a 
representative  stockholder  may  sue  if  the  association  will 
not,^"  and  perhaps  that  a  creditor  may  in  proper  case  sue  when 
the  association  is  insolvent.^*^ 

The  right  of  action  is  for  a  tort,  and  comes  within  the  com- 

138  National  Bank  of  Commerce  v.  Wade  (C.  C.)  84  Fed.  10.  See. 
also,  7inn  v.  Baxter,  Go  Ohio  St.  341,  G2  N.  E.  327.  See  ''Banks  and 
Banking,"  Dec.  Digf  (Koq^  No.)  §  25 J,;  Cent.  Dig.  §§  950-957. 

i39Cockrill  V.  Abeles,  86  Fed.  505,  30  C.  C.  A.  223;  Cockrill  v. 
Cooper,  86  Fed.  10,  29  C.  C.  A.  529 ;  Allen  v.  Luke  (C.  C.)  141  Fed. 
694.  See,  also,  Flynn  v.  Third  Nat.  Bank,  122  Mich.  G42,  81  N.  W. 
572.  See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  254;  Cent. 
Dig.  §§  950-951. 

140  Bailey  v.  Mosher,  63  Fed.  488,  11  C.  C.  A.  304.  But  see  Boyd  v. 
Schneider,  131  Fed.  223,  65  C.  C.  A.  209,  in  which  it  was  held  that 
depositors  of  an  insolvent  hank  could  maintain  a  suit  in  equity 
against  its  directors  for  negligently  permitting  its  officers  to  loan  the 
bank's  assets  in  violation  of  the  act.  on  the  ground  that  such  con- 
duct was  a  breach  of  the  bank's  implied  contract  with  the  depositors 
that  the  bank  would  use  such  deposits  and  its  other  assets  in  con- 
formity with  the  safeguards  provided  by  law.  The  court  said  that 
the  question  was  not  whether  the  amount  received  might  not  become 
an  asset  of  the  bank,  but  whether  the  depositors  might  not  enforce 
the  liability  as  a  right  special  to  them,  a  right  growing  out  of  the 
contract  of  deposit,  and  therefore  not  common  to  stockholders  and 
other  creditors.  Upon  this  ground  it  is  difficult  to  reconcile  the  de- 
cision with  the  current  of  authority,  although  it  is  reconcilable  on 
the  ground  that  the  receiver,  as  well  as  the  comptroller,  had  been 
asked  and  had  refused  to  bring  suit  against  the  directors.  See 
•'Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  25J/;  Cent.  Dig.  §§ 
950-957. 

141  Ante,  p.  ,•',04. 

142  Ante,  p.  304.  See  Boyd  v.  Schneider,  131  Fed.  223,  65  C.  C  A-. 
209.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  25-'f;  Cent. 
Dig.  §§  950-951. 


§§    104-105)  CIVIL   LIABILITY    OF   OFFICERS  403 

mon-law  definition  of  an  action  on  the  case."^  But  a  suit  is 
cognizable  in  .equity  when  the  remedy  at  law  is  not  complete  or 
adequate,  as  where  the  transactions  are  complicate(J^and  the 
conversion  of  securities  into  money  is  recjuired  before  the  ex- 
tent of  the  liability  can  be  ascertained. ^■'■' 

Whether,  in  a  suit  to  enforce  the  statutory  liability  of  di- 
rectors, the  forfeiture  of  the  bank's  charter  in  a  suit  brought 
by  the  comptroller  is  a  condition  precedent,  is  a  question  on 
which  the  cases  are  in  conflict.  On  the  one  hand,  it  has  been 
said  that  the  cause  of  action  is  purely  statutory,  and  that  the 

143  Cockrill  V.  Butler  (C.  C.)  7S  Fed.  679.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  2.T-J;  Cent.  Dig.  §§  950-051. 

144  National  Bank  of  Commerce  v.  Wade  (C.  C.)  84  Fed.  10.  See, 
also,  In  re  Wright  (D.  C.)  177  Fed.  578. 

A  court  of  equity  has  jurisdictiou  of  tt  suit  against  the  directors 
for  excessive  loans,  under  Rev.  St.  U.  S.  §§  b200,  5239  (U.  S.  Comp. 
St.  1901,  pp.  3494,  3515),  where  the  suit  is  against  a  large  number 
of  directors,  whose  terms  of  service  were  not  identical,  whei'e  the  ex- 
cessive loans  were  inaugurated  by  one  set  of  directors,  and  continued, 
renewed,  or  enlarged  by  another,  and  where  the  directors  were  also' 
charged  with  a  violation  of  section  5204  (page  3495),  in  declaring 
dividends.     Cockrill  v.  Cooper,  86  Fed.  10,  29  C.  C.  A.  529. 

The  directors  are  not  trustees  of  an  express  trust,  with  respect  to 
the  property  of  the  bank,  but  of  an  implied  or  resulting  trust  creat- 
ed by  operation  of  the  law  upon  their  official  relation  to  the  bank; 
and  the  statute  of  limitations  and  the  doctrine  of  laches  may  be  in- 
voked in  their  defense,  when  sued  for  a  breach  of  such  trust.  Such 
an  action  is  maintainable  either  at  law  or  in  equity,  and  a  court  of 
equity  will  follow  the  statute  of  limitations,  unless  unusual  or  extra- 
ordinary circumstances  render  its  application  inequitable  in  a  par- 
ticular case.     Cooper  v.  Hill,  94  Fed.  582,  36  C.  C.  A  402. 

Where  a  bank  suffered  losses  through  the  continued  negligence  of 
its  directors,  which  was  unknown  to  its  creditors,  and  such  di- 
rectors remained  in  control  until  the  appointment  of  a  receiver  on 
the  bank's  insolvency,  a  court  of  equity  will  entertain  a  suit  to 
charge  them  with  personal  liability,  notwithstanding  the  fact  that  an 
action  at  law  to  recover  for  their  wrongful  acts  would  be  barred 
by  limitation  under  the  laws  of  the  state.  Rankin  v.  Cooper  (C.  C.) 
149  Fed.  1010.  -S'ee  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  25.^; 
Cent.  Dig.  §§  950-957. 


404  NATIONAL  BANKS  (Ch.  12 

Statute  makes  an  adjudication  of  the  forfeiture  in  a  suit  by 
the  comptroller  a  condition  precedent. ^*^  On  the  other  hand, 
it  has  been  said,  in  cases  involving  loans  in  excess  of  the  au- 
thorized amount,  that  the  directors  are  liable  at  common  law 
for  unauthorized  acts,  as  well  as  for  failure  to  exercise  proper 
diligence,  when  such  acts  result  in  damage  to  the  corporation, 
and  that  the  statute  as  a  whole  prescribes  a  standard  of  duty 
without  creating  a  new  cause  of  action,  or  altering  the  founda- 
tion upon  which  the  liability  of  directors  for  neglect  or  wrong- 
ful acts  ultimately  rests,  and  that  Congress  did  not  intend  to 
declare  that  directors  should  only  be  subject  to  suit  for  losses 
through  excessive  loans  in  those  cases  where  the  charter  has 
first  been  forfeited  at  the  instance  of  the  comptroller.  It  is 
also  said  that  such  an  interpretation  of  the  statute,  to  the  ex- 
tent that  it  would  prevent  a  bank,  while  a  going  concern,  from 
maintaining  a  suit  against  directors  for  losses  sustained  by. 
acts  confessedly  unlawful,  was  not  intended/*® 

145  See  Welles  v.  Graves  (C.  C.)  41  Fed.  459;  Hayden  v.  Thomp- 
son (C.  C.)  67  Fed.  273;  Gerner  v.  Thompson  (C.  C.)  74  Fed.  12.0. 
Hee  ''Banks  und  Banking,'"  Bee.  Big.  {Key  No.)  §  254;  Cent.  Big.  §§ 
950-957. 

146  Cockrill  V.  Cooper,  86  Fed.  7,  29  C.  C.  A.  529.  See,  also,  Ste- 
phens V.  Overstolz  (C.  C.)  43  Fed.  771 ;  National  Bank  of  Commerce  v. 
Wade  (C.  C)  84  Fed.  10 ;  Allen  v.  Luke  (C.  C.)  141  Fed.  694. 

So  far  as  the  cause  of  action  is  for  knowingly  violating  a  com- 
mand of  the  act,  it  seems  to  be  purely  statutory,  Yates  v.  Jones 
Nat.  Bank,  206  U.  S.  158,  27  Sup.  Ct.'  638,  51  L.  Ed.  1002. 

Nevertheless  it  appears  reasonable  to  construe  the  provision  that  a 
violation  must  be  adjudged  at  the  suit  of  the  comptroller  as  applying 
only  to  a  forfeiture,  and  not  as  requiring  that  a  violation  shall  be  so 
adjudged  and  a  forfeiture  declared  as  a  condition  precedent  to  an 
action  against  a  director  for  damages  sustained  by  the  association, 
its  shareholders,  or  any  other  person.  See  ''Batiks  and  Banking," 
Bee.  Big.  (Key  No.)  §  254;  Cent.  Big.  §§  950-957. 


§    100)  CRIMINAL    LIABILITY    OF   OFFICERS  405 

CRIMINAL  LIABILITY  OF  OFFICERS 

106.  The  National  Bank  Act  denounces  as  crimes' certain 
acts  on  the  part  of  the  officers,  clerks  and  agents 
of  national  banks — among  such  acts  being  the  false 
certification  of  checks ;  the  embezzlement,  abstrac- 
tion, and  willful  misapplication  of  the  bank's  funds ; 
the  unauthorized  issue  of  the  notes  of  the  associ- 
ation, or  of  certificates  of  deposit;  the  unauthor- 
ized drawing,  making,  or  assignment  of  certain 
instruments,  etc. ;  and  the  making  of  certain  false 
entries. 

Wrongfully  Certifying  Check 

The  National  Bank  Act  ^*'^  makes  it  unlawful  for  any  officer, 
clerk,  or  agent  of  any  association  to  certify  any  check  drawn 
upon  the  association,  unless  the  person  or  association  drawing 
the  check  had  on  deposit  with  the  association,  at  the  time  of 
drawing  it,  an  amount  of  money  equal  to  the  amount  specified 
in  the  check,  and  provides  that  any  officer,  clerk,  or  agent  of 
such  association,  w4io  shall  willfully  violate  the  provisions  of 
the  section,  or  who  shall  resort  to  any  device,  or  receive  any 
fictitious  obligation,  direct  or  collateral,  in  order  to  evade  the 
provisions  thereof,  or  who  shall  certify  checks  before  the 
amount  thereof  shall  have  been  regularly  entered  in  the  credit 
of  the  dealer  upon  the  books  of  the  association,  shall  be  guilty 
of  a  misdemeanor.^^^ 

147  Rev.  St.  U.  S.  §  -.208;  Act  July  12,  18S2,  c.  290,  §  13,  22  Stat.  166 
(U.  S.  Comp.  St.  1901,  p.  3497). 

148  Sectiou  .5208  does  not  create  a  criminal  offense,  but,  read  with 
AcL  July  12,  18S2.  c.  290.  22  Stat.  166  (U.  S.  Comp.  St.  1901.  p. 
3497),  the  two  create  one  offense.  United  States  v.  Ileinze  (C.  C.)  161 
Fed.  42.J. 

To  constitute  a  willful  violation,  a  wrongful  intent  is  essential: 
and  an  officer  certifying,  Iielieving  in  good  faith,  and  having  reasona- 
ble grounds,  that  the  drawer  had  a  sufficient  deposit,  could  not  be 


406  NATIONAL  BANKS  (Ch.  12 

Embezzlement,  etc. 

The  act  ^"^  provides  that  every  president,  director,  cashier, 
teller,  clerk,  or  agent  of  any  association,  who  embezzles,^^°  ab- 

convicted,  though  the  account  was  ovel•cll•a^Yn.  Spurr  v.  United 
States,  174-  U.  S.  728,  19  Sup.  Ct.  812,  43  L.  Ed.  1150. 

Defendant  can  show  a  positive  agreement  on  the  part  of  the  of- 
ficers that  the  overdraft  caused  by  the  certified  check  should  be 
practically  treated  as  a  loan  from  day  to  day,  secured  by  collateral, 
and  that  before  issue  of  the  check  an  ample  amount  of  cash  was  de- 
posited. Potter  V.  United  States,  155  U.  S.  4.38,  15  Sup.  Ct.  144, 
39  L.  Ed.  214. 

Knowledge  that  the  false  certification  is  in  violation  of  the  law  is 
not  essential ;  the  intent  being  imported  from  knowledge  of  the 
facts.    Chadwick  v.  United  States,  141  Fed.  225,  72  C.  C.  A.  343. 

While  it  is  a  settled  rule  that  an  indictment  for  conspiracy  will 
not  lie  where  a  plurality  of  agents  is  logically  necessary  to  complete 
the  crime  which  it  was  the  object  of  the  conspiracy  to  commit,  such 
rule  does  not  apply  to  an  indictment  under  Rev.  St.  U.  S.  §  5440  (U. 
S.  Comp.  St.  1901,  p.  3676),  for  a  conspiracy  between  the  defendant, 
who  had  no  official  connection  with  a  national  bank,  and  an  officer 
of  such  bank,  to  violate  Rev.  St.  U.  S.  §  5208  (U.  S.  Comp.  St.  1901,  p. 
3497),  by  causing  a  check  of  defendant  drawn  on  the  bank  to  be 
certified  by  such  officer  when  defendant  did  not  have  a  sufficient 
amount  on  deposit  to  pay  the  same.  Chadwick  v.  United  States,  141 
Fed.  225,  72  C.  C.  A.  343. 

Sufficiency  of  indictment,  see  Potter  v.  United  States,  155  U.  S.  438, 
15  Sup.  Ct.  144,  39  L.  Ed.  214;  United  States  v.  Potter  (C.  C.)  50 
Fed.  83;  United  States  v.  Heinze  (C.  C.)  161  Fed.  428.  See  ''Banka 
and  BanJcinff,"  Dec.  DUj.  {Key  No.)  §  256;   Cent.  Dig.  §§  958-967. 

149  Rev.  St.  U.S.  §  5209  (U.  S.  Comp.  St.  1901,  p.  3497). 

150  Embezzlement  is  a  word  of  technical  meaning.  It  Involves  the 
unlawful  conversion  by  an  officer,  clerk,  or  ~agent  of  the  bank  of 
moneys,  funds,  or  credits  of  the  bank  intrusted  to  him.  United  States 
V.  Northway,  120  U.  S.  327,  7  Sup.  Ct.  -580,  30  L.  Ed.  664 ;  United 
States  V.  Youtsey  (C.  C.)  91  Fed.  864.  See,  also,  Claassen  v.  United 
States.  142  U.  S.  140,  12  Sup.  Ct.  169,  35  L.  Ed.  966;  Mclvnight  v. 
United  States,  115  Fed.  972,  54  C.  C.  A.  358.  "Misapplication"  is 
broader,  and  covers  "embezzlement."  Jewett  v.  United  States,  100 
Fed.  832,  840;  41  C.  C.  A.  88,  53  L.  R.  A.  568. 

As  to  the  distinction  between  embezzlement,  abstraction,  and  will- 
ful misapplication,  see  United  States  v.  Harper  (C.  C.)  33  Fed.  471 ; 


§    lOG)  CRIMINAL    LIABILITY    OF   OFFICERS  407 

stracts,^'^^  or  willfully  misapplies  ^°-  any  of  the  moneys,  funds, 
or  credits  of  the  association,  or  who,  without  authority  from 
the  directors,  issues  or  puts  in  circulation  any  of  the  notes  of 

United  States  v.  Youtsey  (C.  C.)  91  Fed.  804;  United  States  v. 
Breeze  (D.  C.)  131  Fed.  915.  Sec  ''Jianhs  and  I{(inkin(/,"  Dec.  Dig. 
{Key  No.)  §  256;    Cent.  Dig.  §§  958-967. 

151  " 'Abstract'  *  *  *  is  not  a  word  of  settled  teclinical  mean- 
ing, lllie  tlie  word  'embezzle.'  *  ♦  *  It  is  a  word,  however,  of 
simple,  popular  meaning,  without  ambiguity.  It  means  to  take  or 
withdraw  from;  so  that  to  abstract  the  funds  of  the  bank,  or  a 
portion  of  them,  is  to  take  and  withdraw  from  the  possession  and 
control  of  the  bank  the  mojieys  and  funds  alleged  to  be  so  abstract- 
ed. This,  of  course,  does  not  embrace  every  element  of  that  which, 
under  this  section  of  the  statute,  is  made  the  offense  of  criminally 
abstracting  the  funds  of  the  bank.  To  constitute  that  offense,  with- 
in the  meaning  of  the  act,  it  is  necessary  that  the  moneys  and  funds 
should  be  abstracted  from  the  bank  without  its  knowledge  and  con- 
sent, with  the  intent  to  injure  or  defraud  it,  or  some  other  company 
or  person,  or  to  deceive  some  officer  of  the  association,  or  an  agent 
appointed  to  examine  its  affairs."  United  States  v.  Northway,  120 
U.  S.  327,  7  Sup,  Ct.  580.  30  L.  Ed.  664.  See  "Banka  and  Banking," 
Dec.  Dig.  (Key  No.)  §  256 :  Cent.  Dig.  §§  958-961. 

152  "Willful  misapplication  *  *  *  means  something  different 
from  the  acts  of  official  maladministration  referred  to  in  .section 
5239.  Rev.  St.  U.  S.  (U.  S.  Comp.  St.  1901,  p.  3515),  and  it  must  be 
a  willful  misapplication  for  the  use  or  benefit  of  the  party  charged, 
or  of  some  person  or  company,  other  than  the  association,  with  in- 
tent to  injure  and  defraud  the  association,  or  some  otlier  body  cor- 
porate or  some  natural  person,  and  it  must  be  charged  in  the  indict- 
ment that  such  misa]i])licatiou  was  so  made;  and  where  the  counts 
in  an  indictment  eliai;ge  the  fraudulent  purchase  by  the  defendant, 
as  president,  of  certain  shares  of  stock  'in  trust  for  the  use  of  said 
association,  and  which  shares  of  stock  were  not  purchased  as  afore- 
said in  order  to  prevent  loss  upon  any  debts  theretofore  contracted 
with  said  association  in  good  faith,'  they  do  not  charge  a  crimiiial 
misapplication  of  funds,  but  a  mere  maladministration  of  the  af- 
fairs of  the  bank."  United  States  v.  Britton,  107  U.  S.,  055,  2  Sup. 
Ct.  512,  27  L.  Ed.  520,  See,  also.  United  States  v.  Britton,  108  U.  S. 
193,  2  Sup.  Ct.  526.  27  L.  Ed.  701  :  United  States  v.  Northway.  120  U. 
S.  327,  7  Sup.  Ct.  580,  30  L.  Ed.  664  ;  Batchelor  v.  United  States,  1-56 
U.  S.  426,  15  Sup.  Ct.  460,  39  I>.  Ed.  478. 

As  the  procuring  of  a  dividend  by  a  banking  association,   when 


40'8  NATIONAL  BANKS  (Ch.  12 

the  association,^'^  or  who,  without  such  authority,  issues  or 
puts  fofth  any  certificates  of  deposits,  draws  any  order  or  bill 
of  exchange,  makes  any  acceptance,  assigns  any  note,  bond, 
draft,  bill  of  exchange,  mortgage,  judgment,  or  decree,  or 
makes  any  false  entry  in  any  book,  report,  or  statement  of 

there  are  no  net  profits  to  paj-  it,  is  not  a  willful  misapplication  of 
the  moneys  and  funds  of  the  association,  under  section  5209  (page 
3497),  a  conspiracy  to  commit  such  act  is  not  made  punishable  by 
section  5440  (page  3676).  United  States  v.  Britton,  108  U.  S.  199,  2 
Sup.  Ct.  .531,  27  L.  Ed.  698. 

Persons  not  officers  or  agents  may  be  aiders  and  abettors.  Coffin  v. 
United  States.  156  U.  S.  432,  15  Sup.  Ct.  394.  39  L.  Ed.  481.  See.  al- 
so, Evans  v.  United  States,  153  U.  S.  584,  14  Sup.  Ct.  934,  38  L.  Ed.  830. 

A  charge  that,  if  defendant  "either  embezzled  or  willfully  mis- 
applied" the  funds  or  credits  of  the  bank,  "whereby,  as  a  necessary, 
natural,  or  legitimate  consequence,  its  capital  was  reduced,  or  placed 
beyond  the  control  of  the  directors,  or  its  ability  to  meet  its  en- 
gagements or  obligations,  or  to  continue  its  business,  was  lessened 
or  destroyed,  the  intent  to  injure  or  defraud  the  bank  may  be  pre- 
sumed," is  correct,  as  a  statement  of  law.  Agnew  v.  United  States, 
165  U.  S.  36,  17  Sup.  Ct.  235,  41  L.  Ed.  624. 

An  indictment  for  the  willful  misapplication  of  funds  of  a  bank 
by  an  officer,  with  intent  to  defraud,  by  receiving  and  discounting 
with  its  money  an  absolutely  unsecured  promissory  note  of  a  named 
partnership,  whereby  the  proceeds  of  the  discount  of  the  note  were 
wholly  lost  to  the  bank,  need  not  charge  a  conversion  by  the  recipi- 
ent of  the  proceeds  of  the  discount,  provided  it  does  allege  a  conver- 
sion by  such  officer.  United  States  v.  Heinze,  218  U.  S.  532,  31  Sup. 
Ct.  98,  54  L.  Ed.  1139. 

The  misappropriation  of  the  funds  of  a  bank  by  an  officer  in  the 
honest  exercise  of  official  discretion,  in  good  faith,  without  fraud, 
for  the  advantage,  or  supposed  advantage,  of  the  bank,  is  not  punish- 
able ;  but  if  official  action  be  taken,"  not  in  the  honest  exercise  of 
discretion,  in  bad  faith,  for  personfll  advantage,  and  with  fraudu- 
lent intent,  it  is  punishable.  United  States  v.  Fish  (C.  C.)  24  Fed. 
585. 

The  fact  that  the  officers  of  a  bank  which  has  gone  into  liciuida- 
tion  occupy  the  relation  of  trustees  for  creditors  does  not  preclude 


153  See  United  States  v.  Harper  (C.  C.)  33  Fed.  471,  476.  See 
''Banks  and  BanJchif/;'  Dec.  Dig.  {Key  No.)  §  256;  Cent.  Dig.  §§  9o&- 
967. 


§    106)  CRIMINAL    LIABILITY    OF    OFFICERS  409 

the  association,  with  intent,  in  cither  case,  to  injure  or  defraud 
the  association,  or  any  other  company,  body  poHtic  or  corpo- 
rate, or  any  individual  j^crson,  or  to  deceive  any  officer  of  the 
association,  or  any  a,c:ent  appointed  to  examine  the  affairs  of 
such  association, ^°*  and  every  person  who  with  like  intent  aids 

the  president,  who  has  been  appointed  as  agent  by  the  shareholders, 
to  assist  in  the  liquidation,  from  beins  prosecuted  under  Rev.  St. 
U.  S.  §  5209,  for  willfully  misai)plying  the  assets  of  the  association. 
Jewett  V.  United  States,  100  Fed.  S32,  41  C.  C.  A.  88,  53  L.  R.  A.  568. 

The  offense  may  be  consummated  by  giving  fraudulent  credits,  and 
the  transfer  of  the  same  by  checks.  Rieger  v.  United  States,  107 
Fed.  917,  47  C.  C.  A.  Gl. 

The  discounting  by  the  president  with  the  funds  of  the  bank  of 
commercial  paper  known  by  him  to  be  worthless  or  fictitious,  for  the 
benefit  of  an  insolvent  corporation  of  which  he  is  an  oflicer,  and  with 
intent  to  Injure  and  defraud  the  bank,  is  a  willful  misapplication  of 
its  funds.     Flickinger  v.  United  States,  150  Fed.  1,  79  C.  C.  A.  515. 

The  oflicers  possess  no  authority  to  permit^  a  conversion  of  the 
bank's  funds  to  the  use  of  one  of  them ;  nor  is  it  a  defense  that  the 
money  is  refunded.    United  States  v.  Morse  (C.  C.)  161  Fed.  429. 

For  an  officer,  who  is  also  a  promoter  of  various  enterprises,  to 
obtain  the  funds  of  the  bank  on  the  security  of  unmarketable  bonds 
of  his  own  enterprises,  at  the  risk  of  the  interest  of  the  bank,  is  a 
misapplication  of  the  funds,  which  cannot  be  covered  up  by  entering 
the  transactions  on  the  books  as  loans  and  investments.  Walsh  v. 
United  States,  174  Fed.  616,  98  C.  C.  A.  461.  See  '-Banl^s  and  Banl- 
im;,"  Dec.  Dig.  (Key  No.)  §  256;    Cent.  Dirt.  §§  958-967. 

iM  The  assistant  cashier  of  a  bank  is  indictable  for  making  a  false 
entry  in  a  report  to  the  comptroller,  although  he  is  not  one  of  the 
officers  authorized  by  Rev.  St.  U.  S.  §  5211  (U.  S.  Comp.  St.  1901,  p. 
349S),  to  make  such  a  report;  for  he  may  be  regarded  as  within  the 
category  of  "clerk  or  agent."  within  the  terms  of  section  5209  (page 
3497).  The  president  and  assistant  cashier  are  indictable  as  princi- 
pals for  making  a  false  entry  in  a  report,  although  neither  of  them 
actually  signed  or  attested  the  report.  Cochran  v.  United  States, 
157  U.  S.  2S6,  15  Sup.  Ct.  628.  39  L.  Ed.  704. 

Where  a  transaction  by  an  officer,  made  with  Intent  to  defraud, 
is  entered  upon  a  deposit  slip,  the  entry  of  the  contents  of  such 
slip  upon  the  books  of  the  bank,  by  the  officer  personally  or  by  his 
direction,  Is  the  making  of  a  "false  entry."  Agnew  v.  United  States, 
165  U.  S.  86,  17  Sup.  Ct.  235,  41  L.  Ed.  624. 

The  statute  which   punishes   false   entries   to   deceive  agents  ap- 


410  NATIONAL   BANKS  (Ch.  12 

or  abets  any  officer,  clerk,  or  agent  in  violation  of  this  section, 
shall  be  deemed  guilty  of  a  misdemeanor. 


FORFEITURE  AND  DISSOLUTION 

107.  A  national  banking  association  forfeits  its  franchise  if 
its  officers  knowingly  violate  any  provisions  of  the 
act,  and  may  be  dissolved  v^hen  such  violation  is 
adjudged  by  a  proper  court. 

If  the  directors  of  any  association  knowingly  violate,  or  per- 
mit any  of  the  officers,  agents,  or  servants  of  the  association  to 
violate,  any  of  the  provisions  of  the  act,  all  the  rights,  privi- 
leges, and  franchises  of  the  association  shall  be  thereby  for- 
feited. Before  the  association  shall  be  declared  dissolved,  how- 
pointed  under  section  5240,  Rev.  St.  U.  S.  (U.  S.  Comp.  St.  1901,  p. 
.'1516),  to  examine  the  affairs  of  national  banking  associations,  re- 
fers to  any  entries  made  with  that  intent,  whether  before  or  after 
the  appointment  of  the  agent.  United  States  v.  Bi-itton,  107  U.  S. 
G55,  2  Sup.  Ct.  512,  27  L,.  Ed.  520. 

The  comptroller  of  the  currency  is  an  agent  within  the  provision 
that  every  officer  who  makes  any  false  entry  in  a  report  to  any 
agent  appointed  to  examine  the  affairs  of  such  association  shall  be 
guilty  of  a  misdemeanor,  and  it  is  immaterial  that  Rev.  St.  U.  S. 
§  5240  (U.  S.  Comp.  St.  1901,  p.  3516),  confers  power  upon  him  to 
appoint  suitable  agents  to  examine  the  affairs  of  such  banks.  In,- 
tent  to  injure  a  bank  by  a  false  report  to  the  comptroller  is  not  neg- 
atived as  matter  of  law  by  the  fact  that  the  report  showed  the  bank 
to  be  in  better  condition  than  it  really  was.  United  States  v.  Cor- 
bett,  215  U.  S.  2.33,  30  Sup.  Ct.  81,  54  L.  Ed.  173. 

The  section  includes  a  false  entry  in  a  report  voluntarily  made,  if 
with  the  requisite  unlawful  intent.  Harper  v.  United  States,  170 
Fed.  385,  95  C7  C.  A.  555.  See,  also,  Bacon  v.  United  States,  97  Fed. 
:J5,  38  C.  C.  A.  37. 

Entries  in  the  books  of  a  bank  showing  loans  to  persons  named 
on  the  security  of  stocks  deposited  as  collateral,  when  in  fact  the 
transactions  were  purchases  of  the  stock  by  the  bank,  the  suppos- 
ed borrowers  being  merely  dummies,  wholly  irresponsible  for  the 
amount  of  the   notes   which   they   gave,    without   any   intention   of 


§    108)  VOLUNTARY   LIQUIDATION  411 

ever,  the  violation  shall  be  determined  and  adjudj^ed  by  a  prop- 
er court  of  the  United  States,  in  a  suit  brought  for  that 
purpose  by  the  comptroller  of  the  currency  in  his  owjjjiame.^'' 


VOLUNTARY  LIQUIDATION 

108.  A  national  bank  may  go  into  voluntary  liquidation  and 
be  closed  by  vote  of  the  stockholders,  upon  com- 
plying with  the  requirements  of  the  act. 

Any  association  may  go  into  liquidation  and  be  closed  by 
a  vote  of  two-thirds  of  its  stock.  Notice  of  the  fact  must  be 
certified  to  the  comptroller  of  the  currency,  andi  publication 
must  be  made  that  the  association  is  closing  up  its  affairs,  and 

paying  the  same  or  any  knowledge  of  the  actual  transactions,  were 
false  entries,  and,  when  made  by  the  direction  of  an  officer  of  the 
bank  who  conducted  the  transactions,  a  jury  was  justified  in  finding 
that  they  were  fraudulent  and  made  with  intent  to  deceive  the  bank 
examiner  and  his  agents.  The  fact  that  entries  in  a  report  made 
by  a  bank  to  the  comptroller  accurately  state  the  facts  as  shown  by 
the  books  does  not  prevent  them  from  being  false,  where  the  books 
themselves  do  not  correctly  show  the  actual  transactions  op  condi- 
tion of  the  bank.  Morse  v.  United  States,  174  Fed.  539.  J)8  C.  C.  A. 
321.  See,  also,  Playes  v.  United  States,  169  Fed.  101,  94  C.  C.  A.  449. 
Cf.  Twining  v.  United  States,  141  Fed.  41,  72  C.  C.  A.  529.  See,  gen- 
erally, Allis  y.  United  States,  1.55  U.  S.  117,  15  Sup.  Ct.  30,  39  L.  Ed. 
91;  Scott  V.  United  States,  130  Fed.  429,  64  C.  C.  A.  631;  Richard- 
son V.  United  States,  181  Fed.  1,  104  C.  C.  A.  69.  See  "Banks  and 
Banling,"  Dec.  Duj.  {Key  A'o.)  §  256;   Cent.  Dig.  §§  958-967. 

153  Rev.  St.  U.  S.  §  5239  (U.  S.  Comp.  St.  1901,  p.  351.5);  ante,  p. 
398.  Sufficiency  of  information  for  forfeitiu'e.  I'renholm  v.  Commer- 
cial Nat.  Bank  (C.  C.)  38  Fed.  323.  The  forfeiture  comes  within  Rev. 
St.  U.  S.  §  1047  (U.  S.  Comp.  St.  1901,  p.  727),  limiting  suits  for  a 
penalty  or  forfeiture  to  five  years.  Welles  v.  Graves  (C.  C.)  41  Fed. 
460. 

Until  the  forfeiture  is  determined,  the  bank  may  do  busine.ss.  Ste- 
phens V.  Monongahela  Nat.  Bank,  88  Pa.  157,  32  Am.  Rep.  4.38.  See 
"Banks  and  Bankino"  Dec.  Dig.  {Key  No.)  §  2S.'f;  Cent.  Dig.  §§ 
1083-1087. 


412  NATIONAL  BANKS  (Ch.  12 

notifying  note  holders  and  other  creditors  to  present  their 
claims,  and  a  deposit  must  be  made  with  the  treasurer  of  the 
United  States  sufficient  to  redeem  all  outstanding  circulation/^* 
The  association  continues  to  exist,  as  a  person,  in  law,  capable 
of  suing  and  being  sued,  for  the  purpose  of  winding  up  its 
affairs.^"  After  the  bank  has  gone  into  liquidation,  its  officers 
have  no  authority,  unless  such  authority  is  expressly  conferred 
by  the  stockholders,  to  bind  them  by  the  transaction  of  any 
business  except  that  necessarily  involved  in  winding  up  its  af- 
fairs.^^^  Having  ceased  to  do  business  as  a  going  concern,  it 
is  not  required  to  register  a  transfer  of  its  stock  and  to  issue 
a  new  certificate.^^^  The -enforcement  of  the  liabilities  of  the 
stockholders  has  already  been  considered.^ ®°  An  association 
which  is  winding  up  its  affairs  may  consolidate  with  another 
association.^^^ 

156  Rev.  St.  U.  S.  §§  5220-5224  (U.  S.  Comp.  St.  1901,  pp.  3503, 
3504). 

As  to  rights  of  minority  stockholders,  see  Green  v.  Bennett  (Tex. 
Civ.  App.)  110  S.  W.  108;  Watkins  v.  National  Bank  of  Lawrence,  51- 
Kan.  254,  32  Pac.  914.  See  "BanJcs  and  Banking;'  Dec.  Dig.  {Key 
Xo.)  §  281;    Cent.  Dig.  §§  1075-1079. 

157  Central  Nat.  Bank  v.  Connecticut  Mut.  Life  Ins.  Co.,  104  U.  S. 
54,  26  L.  Ed.  693 ;  Pritchard  v.  Barnes,  101  Wis.  86.  76  N.  W.  1106 ; 
Merchants'  Nat.  Bank  of  Minneapolis  v.  Gaslin,  41  Minn.  552,  43  N, 
W.  483.  Contra:  Hodgson  v.  McKinstrey,  3  Kan.  App.  412,  42  Pac. 
929.  See  ''Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  281;  Cent. 
Dig.  §§  1075-1079. 

158  Richmond  v.  Irons,  121  U.  S.  27,  7  Sup.  Ct.  788,  30  L.  Ed.  864; 
Schrader  v.  Manufacturers'  Nat.  Bank,  1.S3  U.  S.  67,  10  Sup.  Ct.  238, 
33  L.  Ed.  564.  See  ''Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §  262; 
Cent.  Dig.  §§  1001-1006. 

159  Muir  V.  Citizens'  Nat.  Bank,  39  Wash.  57,  80  Pac.  1007.  See, 
also,  Richai/ds  v.  Attleborough  Nat.  Bank.  148  Mass.  187,  19  N.  E. 
353,  1  L.  R.  A.  781.  See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.) 
§  281;   Cent.  Dig.  §§  1075-1079. 

160  Ante,  p.  395. 

161  Rev.  St.  U.  S.  §  5223  (U.  S.  Comp.  St.  1901,  p.  3504).  See  Bon- 
net V.   First   Nat.   Bank   (Tex.  Civ.  App.)  00   S.   W.   325;    Green  v. 


§    109)  INVOLUNTARY    LIQUIDATION  413 

INVOLUNTARY  LIQUIDATION 

109.  Whenever  any  association  is  dissolved  and  Its  fran- 
chises are  declared  forfeited  for  violation  of  the 
act,  or  whenever  any  creditor  obtains  judgment 
against  any  association  in  a  court  of  record,  and 
makes  application  accom.panied  by  a  certificate  of 
the  clerk  of  the  court  stating  that  such  judgment 
has  been  rendered  and  has  remained  unpaid  for  30 
days,  and  whenever  the  comptroller  of  the  curren- 
cy shall  have  become  satisfied  of  the  insolvency  of 
an  association,  he  may,  after  due  examination  of 
its  affairs,  in  either  case,  appoint  a  receiver  to  wind 
up  its  affairs  and  enforce  the  liability  of  the  stock- 
holders. Authority  is  also  conferred  upon  the 
comptroller  to  appoint  such  a  receiver  for  failure  of 
an  association  to  comply  with  certain  other  re- 
quirements of  the  act.  When  the  receiver  has  paid 
the  debts  of  the  association,  with  certain  excep- 
tions, by  vote  of  the  stockholders  an  agent  may  be 
substituted  for  the  receiver  to  wind  up  the  affairs 
of  the  association. 

Appointment  fif  Receiver 

The  act  as  originally  passed  did  not  provide  for  a  receiver- 
ship upon  the  insolvency  of  the  association.  It  provided  for 
the  appointment  of  a  receiver  by  the  comptroller  to  liquidate 
the  affairs  of  an  association  upon  its  refusal  to  pay  its.  circu- 
lating notes, ^•'^  and  also  in  the  following  cases:  For  the  re- 
duction of  its  stock  below  the  required  minimum,  deficiency  in 
the  required  surplus,  failure  to  maintain  a  proper  reserve,  fail- 
ure to  redeem  or  select  an  agent  for  the  redemption  of  its  cir- 

Beunett  (Tex.  Civ.  App.)  110  S.  W.  lOS.    See  ''Banks  and  Bankhuj;' 
Dec.  Dig.  (Key  No.)  §  2S1 ;    Cent.  Dig.  §§  1075-1079. 

162  Rev.  St.  U.  S.  §  52.34  (U.  S.  Comp.  St.  1901,  p.  §  3507). 


414 


NATIONAL  BANKS  (Ch.  12 


dilating  notes,  holding  its  own  stock  for  six  months,  failure  to 
pay  up  its  capital  stock  and  refusal  to  go  into  liquidation,  and 
improperly  certifying  checks/®^ 

In  view  of  these  and  other  provisions  of  the  act,  it  was  held 
that  national  banks  were  not  subject  to  the  bankrupt  act  of 
1867,  and  that  bankruptcy  courts  had  no  jurisdiction,  as  against 
such  associations.^^*  By  the  present  bankruptcy  act  they  are 
expressly  excepted  from  the  class  of  persons  who  may  be 
adjudged  bankrupts.^®^  It  was  held,  however,  that  the  bank 
act  did  not  oust  the  courts  of  their  power  to  appoint  a  receiver 
in  cases  not  within  the  special  pra\-isions  of  the  act,  as  upon  a 
creditors'  bill.^®® 

By  a  later  enactment  authority  was  conferred  upon  the  comp- 
troller to  appoint  a  receiver  to  close  up  any  association,  after 
due  examination  of  its  affairs :  (1)  When  the  association  is  dis- 
solved and  its  franchises  are  forfeited  for  violation  of  the  pro- 
visions of  the  act;  (2)  when  a  creditor  has  obtained  a  judg- 
ment against  the  association  which  has  been  unpaid  for  30 

163  Rev.  St.  U.  S.  §§  5141,  5151,  5191,  5195.  5201.  5205.  5208  (U. 
S.  Comp.  St.  1901,  pp.  3462,  3465,  34S6,  3492.  3494.  3495,  S497). 

16*  In  re  Manufacturers'  Nat.  Bank,  5  Biss.  499.  Fed.  Cas.  No. 
9.051.  See,  also.  Cook  County  Xat.  Bank  t.  United  States,  107  U.  S. 
445,  2  Sup.  Ct.  561,  27  L.  Ed.  537.  »S'ee  ''Bankruptcy,"  Dec.  Dig.  {Key 
Yo.)  §  n;  Cent.  Dig.  §  1~. 

165  Act  July  1,  1S9S.  c.  .541.  §  4b,  30  vStat.  -547,  as  amended  by 
Act  Feb.  5.  1903,  c.  4S7,  §  3.  .32  Stat.  797  (U.  S.  Comp.  St.  Supp.  1909, 
p.  1309). 

166  Irons  V.  Manufacturers'  Nat.  Bank.  Fed.  Cas.  No.  7.068,  6  Biss. 
301;  Wright  v.  Merchants'  Nat.  Bank.  Fed.  Cas.  No.  18.084,  1  Flip. 
568. 

Under  act  June  3,  1864,  c.  106,  13  Stat.  99,  authorizing  the  for- 
mation of  national  banks,  a  federal  court  sitting  in  equity  had  ju- 
risdiction in  a  proper  case  to  appoint  a  receiver  to  liquidate  its  ob- 
ligations, and  to  authorize  him  to  collect  and  to  enforce  by  action 
the  liability  of  the  shareholders  of  the  bank  under  section  12  of  the 
act  (section  51.51,  Rev.  St.  U.  S.  [U.  S.  Comp.  St.  1901,  p.  3465]). 
King  V.  Pomeroy,  121  Fed.  2S7,  58  C.  C.  A.  200.  See  ''Banks  and 
Banlingr  Dec.  Dig.  (Key  Xo.)  §  287;  Cent.  Dig.  §§  1089-1127. 


§    109)  INVOLUNTAKr    LIQUIDATION  415 

days;    and  (3)  when  the  comptroller  becomes  satisfied  of  the 
insolvency  of  the  association.^®' 

The  comptroller  may  appoint  a  receiver  for  an  insolvent 
bank,  or  make  a  ratable  assessment  on  the  stockhold^,  with- 
out a  prior  judicial  determination  of  the  necessity  for  a  re- 
ceiver or  of  the  existence  of  the  liabilities  of  the  bank.^«*  The 
act,  empowering  the  comptroller  to  appoint  such  receiver  and 
to  make  such  assessments,  does  not  vest  in  him  a  judicial  pow- 
er, in  violation  of  the  constitution.^®^  The  receiver  is  the  agent 
of  the  United  States,  and  not  an  agent  or  officer  of  any  court. ^'*' 
-The  power  of  appointment  by  the  comptroller  carries  with  it 
the  power  of  removal. ^'^ 
Eftect  of  Appointment 

The  appointment  of  receiver  supersedes  the  powers  of  the 
directors  to  exercise  the  incidental  powers  necessary  to  carry 
on  the  business  of  banking:  but  the  corporation  is  not  dis- 
solved, and  the  bank  may  be  sued  and  judgment  mav  be  recov- 
ered against  it,  notwithstanding  the  receivership.^'- 

167  Act  June  30,  1ST6,  c.  150.  §  1,  19  Stat.  63  (U.  S.  Comp.  St.  1901. 
p.  3509). 

16  s  BushneU  v.  Leland.  1»54  U.  S.  6S4.  17  Sup.  Ct.  209.  41  L.  Ed. 
59S. 

His  power  to  appoint,  when  satisfied  of  the  bank's  insolvency,  is 
discretionary,  and  his  decision  as  to  the  insolvency  not  open  to  re- 
view, and  the  power  may  be  exercised,  though  the  bank  has  gone  in- 
to voluntary  liquidation.  Washington  Nat.  Bank  v.  Eckels  (C.  C.)  57 
Fed.  870.  See.  also.  Elwood  v.  First  Nat.  Bank  of  Greenleaf.  41 
Kan.  475.  21  Pac.  673.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key. 
yo.)  §  2S7:  Cent.  Dig.  §§  10S9-1121. 

169  Bushnell  v.  Leland.  164  U.  S.  6S4.  17  Sup.  Ct.  209.  41  L.  Ed. 
59S :  Ex  parte  Chetwood.  165  U.  S.  443.  17  Sup.  Ct.  3S5,  4l  L.  Ed.  7S2. 
See  "Banks  and  Banking,"  Dec.  Dig.  \Keii  .Yo.)  |  2S1 ;  Cent.  Dig.  §| 
10S9-1127. 

1-0  Ex  parte  Chetwood,  165  U.  S.  443,  17  Sup.  Ct.  209,  41  L.  Ed. 
598 ;  Price  v.  Abbott  (C.  C)  17  Fed.  506.  See  'Banks  and  Banking," 
Dec.  Dig.  (Keg  yo.)  §  2S7;  Cent.  Dig.  §§  10S9-1127. 

iTi  See  Kennedy  v.  Gibson,  S  WaU.  498.  19  L.  Ed.  476.  See  "Banks 
and  Banking."  Dec.  Dig.  (Keg  yo.)  §  287;    Cent.  Dig.  §§  10S9-1127. 

1-2  Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall.  383.  20  L.  Ed. 


416 


NATIONAL  BANKS  (Ch.  12 


Powers  and  Duties  of  Receiver 

It  is  provided  that  the  receiver,  under  the  direction  of  the 
comptroller,  shall  take  possession  of  the  books,  records,  and 
assets  of  the  association,  collect  the  debts,  dues,  and  claims  be- 
longing to  it,  and,  upon  order  of  a  court  of  record  of  competent 
jurisdiction,  may  sell  and  compound  all  bad  or  doubtful  debts, 
and,  on  like  order,  may  sell  all  the  real  and  personal  property 
of  the  association,  on  such  terms  as  the  court  may  direct,  and 
may,  if  necessary  to  pay  the  debts  of  the  association,  enforce 
the  individual  liability  of  the  stockholders.^^^  The  provision 
that  the  receiver  shall  act  under  the  direction  of  the  comptrol- 
ler means  that  he  shall  be  subject  to  such  direction,  and  not 
that  he  shall  be  obliged  to  get  special  authority  for  every  act 
that  he  does  in  collecting  the  assets  and  debts.^^*  The  appoint- 
ment vests  in  the  receiver  all  the  assets  of  the  bank,  to  be 
converted  into  money  and  distributed  among  the  creditors  ;  but, 
of  course,  he  acquires  no  right  to  property  in  the  custody  of 
the  bank  which  it  does  not  own,^^^  and  he  takes  the  property  of 
the  bank  subject  to  existing  liens,  incumbrances,  and  defens- 

840;  Chemical  Nat.  Bank  v.  Hartford  Deposit  Co.,  161  U.  S.  1,  16 
Sup.  Ct.  439.  40  L.  Ed.  595 ;  National  Pabquioque  Bank  v.  First  Nat. 
Bank  of  Bethel,  36  Conn.  325,  4  Am.  Rep.  SO. 

The  statute  of  limitations  is  not  set  in  motion  against  a  certificate 
of  deposit,  not  due  until  demand,  by  the  appointment  of  a  receiver. 
Riddle  V.  First  Nat.  Bank  (C.  C.)  27  Fed.  503.  See  "Banks  and  Bank- 
tng."  Dee.  Dig.  {Key  No.)  §  287;   Cent.  Dig.  §§  1089-1127.       , 

17  3  Rev.  St.  U.  S.  §  5234  (U.  S.  Comp.  St.  1901,  p.  3507).  Enforce- 
ment of  stockholders'  liability,  ante,  p.  392.  As  to  power  of  re- 
ceiver to  purchase  property,  in  order  to  protect  the  trust  estate,  in 
"  certain  cases,  see  Act  March  29,  1886,  e.  .28,  24  Stat.  S  (U.  S.  Comp. 
St.  1901,  p.  3514). 

17  4  National  Bank  of  Metropolis  v.  Kennedy,  17  Wall.  19,  21  L.  Ed. 
554;  Turner  v.  Richardson,  180  U.  S.  87,  21  Sup.  Ct.  295,  45  L.  Ed. 
438.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  287;  Cent. 
Dig.  §§  1089-1127. 

17  5  Corn  Exchange  Bank  of  Chicago  v.  Blye,  101  N.  Y.  303,  4  N, 
E.  635.  See  ''Banks  and  Banking,''  Dec.  Dig.  (Key  No.)  §  2S7 ;  Cent. 
Dig.  §§  1089-1127. 


§    109)  INVOLUNTARY    LIQUIDATION  417 

es,^^*  It  is  only  when  debts  are  bad  or  doubtful,  and)  it  is 
deemed  expedient  to  sell  or  compound  them,  that  the  court 
may  jnake  an  order  respecting  them.^"  The  receiver  cannot 
sell  or  compound  debts  or  sell  property  without  an  order  of 
court,  nor  upon  terms  in  conflict  therewith,  and  persons  dealing 
with  him  are  charged  with  notice  of  his  authority.^^^  But, 
by  filing  a  petition  for  leave  to  compound  a  debt  or  to  sell 
property,  the  receiver  does  not  place  the  assets  in  the  custody 
of  the  court,  as  in  the  case  of  a  receiver  appointed  by  the 
court.^^^ 

Actions  by  Receiver 

For  the  purpose  of  collecting  the  debts  and  claims  belonging 
to  the  bank,  the  receiver  may,  of  course,  bring  suit,  and  no  au- 
thorization by  the  comptroller  is  necessary.^^°  He  may  sue  in 
his  own  name  as  receiver,  or  in  the  name  of  the  bank  for  his 

1T6  Scott  V.  Armstrons:,  146  U.  S.  499.  13  Sup.  Ct.  148.  36  L.  Ed. 
1059;  Casey  v.  La  Soci6t6  de  Credit  Mobilier,  Fed.  Cas.  No.  2,496,  2 
Woods,  77 ;  Hatch  v.  Johnsou  Loan  &  Trust  Co.  (C.  C.)  79  Fed.  82S. 
As  to  set-off,  post,  p.  424.  See  "Banks  and  Banking,"  Dec.  Dig.  {Ken 
IS'o.)  §  287;   Oent.  Dig.  §§  1089-1121. 

17  7  Price  V.  Yates,  Fed.  Cas.  No.  11,418;  lu  re  Earle  (C.  C.)  92  Fed. 
22.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  287;.  Cent.  Dig. 
§§  1089-1121. 

ITS  Case  V.  Small  (C.  C.)  10  Fed.  722;  In  re  Earle  (C.  C.)  92  Fed. 
22 ;  Ellis  v.  Little.  27  Kan.  707,  41  Am.  Rep.  434.  Cf.  McCartney  v. 
Earle,  1I5  Fed.  462,  53  C.  C.  A.  392. 

He  may,  upon  sufficient  consideration,  extend  the  time  of  payment 
of  a  debt,  if  he  thereby  secures  additional  security.  People's  State 
Bank  of  Lakota  v.  Francis,  8  N.  D.  369,  79  N.  W.  853. 

The  district  court  is  a  court  of  competent  jurisdiction.  In  re 
Piatt,  Fed.  Cas.  No.  11,211,  1  Ben.  534.  See  "Banks  and  Banking," 
Dee.  Dig.  (Key  Xo.)  §  287;    Cent.  Dig.  §§  1089-1121. 

179  Ex  parte  Chetwood,  165  U.  S.  443,  17  Sup.  Ct.  385,  41  L.  Ed. 
782.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  287;  Cent. 
Dig.  §§  1089-1121. 

ISO  National  Bank  of  Metropolis  v.  Kennedy,  17  Wall.  19,  21  L.  Ed. 
554 ;  Turner  v.  Richardson,  ISO  U.  S.  87,  21  Sup.  Ct.  295,  45  L.  Ed. 
438;    i)ost,  p.  432, 

A  bill  to  recover  dividends  illegally  paid  may  be  brought  without 
Tiff.Bks.&  B.— 27 


4:18  NATIONAL  BANKS  (Ch.  12 

iise.^"  It  is  sufificient  for  the  receiver  to  allege  his  appointment 
in  general  terms,  and  he  need  not  specifically  aver  each  and 
every  thing  provided  by  the  act  as  the  ground  of  appointing  a 
receiver.  "The  debtors  of  a  bank,  when  sued  by  a  receiver,  can- 
not inquire  into  the  legality  of  his  appointment.  It  is  sufficient 
*  *  *  that  he  is  appointed,  and  is  receiver  in  fact.  As  to 
debtors,  the  action  of  the  comptroller  in  making  the  appoint- 
ment is  conclusive,  until  set  aside  on  the  application  of  the 
bank."  ^*-  Having  the  legal  title  to  the  property  covered  by 
his  appointment,  he  may  maintain  an  action  in  his  own  name  in 
a  state  court.^^^ 

Proof  and  Payment  of  Claims  and  Distribution 

It  is  provided  that  the  comptroller,  after  appointing  the  re- 
ceiver, shall  give  published  notice,  calling  on  all  persons  who 
may  have  claims  against  the  association  to  present  them  and 
make  legal  proof,  and  that  from  time  to  time,  after  provision 
for  refunding  to  the  United  States  any  deficiency  in  redeeming 
the  notes  of  the  association,  the  comptroller  shall  make  a  rat- 
able dividend  of  the  money  paid  over  to  him  by  the  receiver 
upon  all  claims  proved  to  his  satisfaction  or  adjudicated  in  a 
court  of  competent  jurisdiction,  and,  as  the  proceeds  of  the 
assets  of  the  association  are  paid  over  to  him,  shall  make  fur- 
ther dividends  on  claims  previously  proved  or  adjudicated,  and 

order  from  the  comptroller.  Hayden  v.  Thompson,  71  Fed.  61,  17 
C.  C.  A.  592.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  i^^o.)  §  287; 
Cent.  Dig.  §§  1089-110^. 

181  Kennedy  v.  Gibson,  8  Wall.  498,  19  L.  Ed.  476;  National  Banlc 
of  Metropolis  v.  Kennedy,  17  Wall.  19,  21  L.  Ed.  554;  Stanton  v. 
Wilkeson,  Fed.  Cas.  No. '13,299,  8  Ben.  357.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  A^o.)  §  287;    Cent.  Dig.  §§  IOSO-IIO4. 

i82Cadle  v.  Baker,  20  Wall.  650,  22  L.  Ed.  448. 

Evidence  of  appointment,  see  Piatt  v.  Beebe,  57  N.  Y.  339.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  287;  Cent.  Dig.  §§ 
10:^9-1104. 

183  Fish  V.  Olin,  76  Vt.  120,  50  Atl.  533.  See  "Banks  and  Bank- 
ing," Dec.  Dig.  (Key  No.)  §  287;    Cent.  Dig.  §§  1089-1104. 


§    109)  INVOLUNTAUY    LIQUIDATION  419 

that  the  remainder  of  the  proceeds  shall  be  paid  over  to  the 
shareholders.^'*'' 

A  claim  proved  to  the  satisfaction  of  the  coropjLroller  is 
placed  upon  the  same  footing  as  if  it  were  reduced  to  judg- 
ment.^®® But  a  claim  disallowed  by  him  may  be  prosecuted  in 
a  state  court  or  other  court  having  jurisdiction  of  such  cases. ^*'' 
In  such  case,  if  the  claim  is  established,  since  the  assets  are 
within  the  control  of  the  comptroller,  the  decree  should  direct 
that  the  claim  as  established  be  certified  to  him,  to  be  paid  in 
due  course  of  administration,  and  not  direct  payment  of  a 
dividend  by  the  receiver.^®^     Dividends  are  to  be  paid  ratably 

IS*  Rev.  St.  U.  S.  §§  52,3."),  523G  (U.  S.  Comp.  St.  XOUl.  p.  3.jOS). 

Bouds  deposited  to  secure  the  circulation  are  lield  by  the  govern- 
ment as  trustee,  and  the  surplus  of  the  proceeds,  after  payment  of 
the  notes,  cannot  be  set  off  by  the  government  against  an  unsecured 
deposit,  but  must  be  distributed  ratably  among  the  creditors.  Cooli 
County  Nat.  Bank  v.  United  States,  107  U.  S.  445,  2  Sup.  Ct.  561,  27 
L.  Ed.  537.  See  "Banks  and  Banldng,"  Dec.  Dig.  (Key  No.)  §  288; 
Cent.  Dig.  §§  1105-1121. 

185  See  National  Bank  of  Commonwealth  v.  Mechanics'  Nat.  Bank. 
94  U.  S.  4.37,  24  L.  Ed.  17G.  See  "Banks  and  Banking;'  Dec.  Dig. 
(Key  Xo.)  §  288;   Cent.  Dig.  §§  1105-1127. 

186  Bank  of  Bethel  v.  Bahquoique  Bank,  14  Wall.  3S3,  20  L,  Ed. 
840. 

While  the  receiver  may  interpose  and  become  a  party,  he  is  not  a 
necessary  party,  and  is  bound  by  a  judgment  against  the  bank. 
Denton  v.  Baker,  79  Fed.  189,  24  C.  C.  A.  47G. 

One  who  takes  dividends  on  a  claim  allowed  is  not  estopped  to  sue 
on  disputed  claims.  Chemical  Nat.  Bank  of  Chicago  v.  World's 
Columbian  Exposition,  170  111.  82,  48  N.  E.  331. 

A  claim  for  rent,  which  was  due  nine  days  before  suspension,  is 
an  existing  demand,  which  may  be  proved.  Chemical  Nat.  Bank  v. 
Hartford  Deposit  Co.,  161  U.  S.  1,  16  Sup.  Ct.  439,  40  L.  Ed.  595. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  288;  Cent.  Dig.  §§ 
1105-1127. 

1S7  Merrill  v.  First  Nat.  Bank,  75  Fed.  148,  21  C.  C.  A.  282;  Wolf 
v.  National  Bank  of  Illinois,  178  111.  85,  52  N.  E.  896.  See,  also, 
Richardson  v.  Louisville  Banking  Co.,  94  Fed.  442,  36  C.  C.  A.  307. 
See  ^'Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  2SS;  Cent.  Dig.  §§ 
1105-1127. 


420  NATIONAL  BANKS  (Ch.  12 

— that  is,  proportionally — on  all  claims  against  the  bank  pre- 
viously proved  and  allowed  by  the  comptroller  or  established 
by  the  adjudication  of  the  court  and  the  payment  of  dividends 
must  be  based  on  the  amount  due  on  the  adjudicated  claim  at 
the  date  of  the  failure,  and  not  on  the  amount  due  when-  the 
claim  is  adjudicated.^®^  A  secured  creditor  is  entitled  to  prove 
and  receive  dividends  on  the  full  amount  due  him  at  the  date 
of  the  insolvency,  without  regard  to  his  collaterals  or  any  col- 
lections he  may  make  upon  them,  provided  the  sums  received 
by  way  of  dividends  and  from  the  collaterals  do  not  exceed  the 
entire  debt/*^ 

Agent  IVJten  Receiver  has  Paid  Debts 

It  is  provided  that  when  the  comptroller  has  paid  the  debts 
of  the  bank,  not  including  those  of  creditors  who  are  share- 
holders, and  all  expenses,  and  the  redemption  of  the  bank's 
circulating  notes  has  been  provided  for,  an  agent  may  be  sub- 
stituted for  the  receiver,  by  a  vote  of  the  majority  of  the  stock, 
to  wind  up  the  bank's  afifairs,  with  power  to  dispose  of  the  as- 
sets, to  sue  and  be  sued,  and  to  sell,  compromise,  or  compound 
the  debts  with  the  consent  of  the  circuit  or  district  court  for  the 
district  where  the  business  of  the  bank  is  carried  on,  to  which 
he  shall  account  andl  which  shall  settle  his  accounts ;  the  pro- 
ceeds of  the  assets,  after  payment  of  expenses,  to  be  distribut- 
ed in  repayment  to  the  stockholders  of  any  amounts  paid  in 

1S8  United  States  ex  rel.  White  v.  Knox,  111  U.  S.  7S4,  4  Sup.  Ct. 
6SG,  28  L,  Ed.  603 ;  American  Nat.  Bank  v.  Williams,  101  Fed.  943, 
42  C.  C.  A.  101.  Allowance  of  interest  on  deposits,  see  National 
Bank  of  Commonwealth  v.  Mechanics"  Nat.  Bank,  94  U.  S.  437,  24 
L.  Ed.  176.  Interest  as  against  stockholders,  see  Richmond  v.  Irons, 
121  U.  S.  27,  7  Sup.  Ct.  7SS,  30  L.  Ed.  SG4.  See  "Banks  and  Bank- 
ing:' Dec.  Big.  {Key  No.)  §  288;    Cent.  Dig.  §§  1105-1121. 

189  Merrill  v.  National  Bank  of  Jacksonville,  173  U.  S.  131,  19  Sup. 
Ct.  300,  43  D.  Ed.  640.  See,  also,  Aldrich  v.  Chemical  Nat.  Bank,  176 
U.  S.  618,  20  Sup.  Ct.  498,  44  L.  Ed.  611;  Chemical  Nat.  Bank  v. 
Armstrong,  59  Fed.  372,  8  C.  C.  A.  155,  28  L.  R.  A.  231.  See  ''Banks 
and  Banking,"  Dec.  Dig.  (Key  -Yo.)  §  288;   Oent.  Dig.  §§  1105-1127. 


§    110)  TKAN-FEHS    AFFECTED    BY    INSOLVENCY  421 

by  them  upon  assessments  on  stock  made  by  the  comptroller, 
and  the  balance  to  be  paid  ratably  among  the  stockholders.^^" 

Such  agent  is  not  an  officer  of  the  court,  althouglT*lTe  is  re- 
quired to  account  to  it.^"^  Suit  may  be  brought  against  the 
agent  by  a  creditor  of  the  bank.^'*- 

TRANSFERS  AND  PAYMENTS  AFFECTED  BY  IN- 
SOLVENCY—PREFERENCES 

110.  Transfers,  assignments,  and  payments  by  an  associa- 
tion, after  the  commission  of  an  act  of  insolvency, 
or  in  contemplation  of  insolvency,  made  with  a 
view  to  prevent  the  application  of  its  assets  in  the 
manner  prescribed,  or  with  a  view  to  the  prefer- 
ence of  one  creditor  to  another,  except  in  payment 
of  its  circulating  notes,  are  void.  No  attachment, 
injunction,  or  execution  shall  be  issued  against 
any  association  or  its  property,  before  final  judg- 
ment in  any  suit,  action,  or  proceeding  in  any  state, 
count}^,  or  municipal  court. 

It  is  provided  that  all  transfers  of  the  notes,  bonds,  bills  of 
exchange  of  any  association,  or  deposits  to  its  credit,  all  as- 
signments of  mortgages,  sureties  on  real  estate,  or  of  judg- 
ments or  decrees  in  its  favor,  all  deposits  of  money,  bullion,  or 
ctjier  valuable  thing  for  its  use,  or  for  the  use  of  any  of  its 
shareholders  or  creditors,  and  all  payments  of  money  to  either, 

190  Act  Jiiue  30.  1876,  c.  15G,  §  3,  19  Stat.  63,  as  amended  by  A-ct 
Aug.  3,  1892,  c.  360,  27  Stat.  345,  Act  March  2,  1897,  c.  354,  29  Stat. 
600  (U.  S.  Comp.  St.  1901,  p.  3510). 

191  Ex  parte  Chetwood,  165  U.  S.  443,  17  Sup.  Ct.  385,  41  L.  Ed. 
782.  See  ''Banks  and  BanJciny,"  Dec.  Dig.  (Key  No.)  §  2S7j  Cent. 
Dig.  §§  1089-1121. 

192  Barron  v.  McKinnon  (C.  C.)  179  Fed.  759. 

Where  the  receiver  is  replaced  by  an  agent,  it  is  proper  to  sub- 
stitute the  latter.  McCouville  v.  Gilmour  (C.^C.)  3G  Fed.  277.  See 
''Banks:  and  Banking,"  Dec.  Dig.  (Key  No.)  §  287;  Cent.  Dig.  §§  1089- 
1105. 


.422  NATIONAL   BANKS  (Cll.  12 

made  after  the  commission  of  an  act  of  insolvency,  or  in  con- 
templation thereof,  made  with  a  view  to  prevent  the  applica- 
tion of  its  assets  in  the  manner  prescribed,  or  with  a  view  to 
the  preference  of  one  creditor  to  another,  except  in  payment  of 
its  circulating  notes,  shall  be  utterly  null  and  void,  and,  fur- 
ther, that  no  attachment,  injunction,  or  execution  shall  be  is- 
sued against  such  association  or  its  property  before  final  judg- 
ment in  any  suit,  action,  or  proceeding  in  any  state,  county, 
or  municipal  court. ^''^ 

Insolvency  means  inability  on  the  part  of  the  bank  to  pay 
its  obligations  in  the  ordinary  course  of  business. ^''^  An  act 
of  insolvency  is  any  act  which  would  be  an  act  of  insolvency  on 
the  part  of  an  individual  banker.^^^  A  bank  may  be  said  to 
be  acting  in  contemplation  of  insolvency  when,  in  making  some 
disposition  of  its  assets,  it  is  actuated  with  a  knowledge  of  its 
insolvency. ^^^  ^ 

193  Rev.  St.  U.  S.  §  5242  (U.  S.  Comp.  St.  1901,  p.  3517). 

The  provision  of  the  New  York  banking  law  that  debts  due  sav- 
ings banks  by  an  insolvent  bank  shall  be  preferred  is  repugnant  to 
Rev.  St.  U.  S.  §§  5236,  5242  (U.  S.  Comp.  St.  1901.  pp.  350S,  3517).  and 
is  therefore  inapplicable  in  the  case  of  a  national  bank.  Davis  v. 
Elmira  Sav.  Bank,  161  U.  S.  275,  16  Sup.  Ct.  .502,  40  L.  Ed.  700.  8ec 
''Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  2SS;  Cent.  Dig.  §§  1115- 
1111. 

194  See  Case  v.  Citizens'  Bank  of  Louisiana,  Fed.  Cas.  No.  2,489. 
2  Woods,  23 ;  Hayden  v.  Chemical  Nat.  Bank.  84  'Fed.  874,  28  C.  C. 
A.  o4S.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  288;  Cent. 
Dig.  §§  1105-1112. 

195  Irons  v.  Manufacturers'  Nat.  Bank.  Fed.  Cas.  No.  7,068,  6  Biss. 
301. 

"An  act  of  insolvency  takes  place  when  a  business  concern  or  a 
bank  has  failed  to  pay  some  of  its  obligations,  made  an  assignment 
for  benefit  of  creditors,  suspended  business,  or  done  any  of  those 
things  which  indicate  to  creditors  that  a  debtor  has  become  insolv- 
ent." Hayden  v.  Chemical  Nat.  Bank,  84  Fed.  874,  28  C.  C.  A.  548. 
See  "Bankruptcy"  Dec.  Dig.  (Key  Xd.)  §§  56,  160;  Cent.  Dig.  §  2^9: 
"Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  2S7 ;    Cent.  Dig.  §  1112. 

i9GSee  Hayden  v.  Chemical  Nat.  Bank,  84  Fed.  874.  2S  C.  C.  A. 
548.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  §  2.88;  Cent. 
Dig.  §§  1105-1121. 


§    110)  TKAN.SFEK.S    AFFKCTEI)    HY    INSOLVENCY  i'S.i 

The  statute  makes  a  transfer  or  a  payment  void  when  it  is 
intended  on  the  part  of  the  bank  to  prefer  one  creditor  to  an- 
other, or  to  defeat  the  distribution  of  its  assets  in  fife'manner 
prescribed  by  law,  notwithstanding  that  the  creditor  receiving 
it  does  so  without  knowledge  or  suspicion  of  the  insolvency  of 
the  bank.^""  But  the  law  does  not  invalidate  every  transfer 
or  payment  by  a  bank  after  it  is  insolvent,  or  even  after  its 
managers  become  aware  of  its  insolvency.^ "^  So  long  as  a 
bank  is  a  going  concern,  carrying  on  its  business  as  usual,  and 
has  committed  no  act  of  insolvency,  and  a  present  suspension 
of  business  is  not  contemplated,  though  the  bank  is  actually  in- 
solvent, payments  or  remittances  in  the  usual  course  of  busi- 
ness are  not  made  in  contemplation  of  insolvency  or  with  a 
view  to  a  preference.^^® 

While  any  disposition  by  a  national  bank,  being  insolvent  or 
in  contemplation  of  insolvency,  of  its  assets,  made  to  prevent 
their  application  to  the  payment  of  its  circulating  notes,  or  to 
prefer  one  creditor  to  another,  is  forbidden,  liens,  equities,  and 
rights  arising  by  express  agreement,  or  implied  from  the  na- 
ture of  dealings  between  the  parties,  or  by  operation  of  law, 
prior  to  and  not  in  contemplation  of  insolvency,  are  not  invali- 
dated.^^^    The  prohibition  is  directed  to  the  giving  of  a  prefer- 

19- National  Security  Bank  v.  Butler,  129  U.  S.  223.  9  Sup.  Ct. 
2S1,  32  L.  Ed.  GS2;  Case  v.  Citizens'  Bank  of  Louisiana.  Fed.  Cas. 
No.  2,489,  2  Woods,  23.  See,  also,  Hayden  v.  Chemical  Nat.  Bank, 
84  Fed.  874,  28  C.  C.  A.  548.  See  "Bunks  and  Banking;'  Dec.  Dig. 
(Key  No.)  §  2S8;   Cent.  Dig.  §§  1105-1121. 

198  See  Hayden  v.  Chemical  Nat.  Bank,  84  Fed.  874,  28  C.  C.  A. 
.348.  See  "Banks  and  Banking,"  Dec.  Dig.  (Keg.  Xo.)  §  28S;  Cent. 
Dig.  §§  1105-1121. 

199  McDonald  v.  Chemical  Nat.  Bank,  174  U.  S.  GIO.  19  Sup.  Ct. 
787,  43  L.  Ed.  HOG,  affirming  Hayden  v.  Chemical  Nat.  Bank,  84  Fed. 
874,  28  C.  C.  A.  548 ;  Hayes  v.  Beardsley,  13G  N.  Y.  299,  32  N.  E.  855. 
See,  also,  Price  v.  Coleman  (C.  C.)  22  Fed.  G94 ;  Stone  v.  Jenison, 
111  Mich.  592,  70  N.  W.  149,  36  L.  R.  A.  G75.  Cf.  Roberts  v.  Hill 
(C.  C.)  24  Fed.  571;  ante,  p.  347.  See  "Banks  and  Banking;'  Dec. 
Dig.  (Keg  .To.)  §  288;   Cent.  Dig.  §§  1105-1121. 

200  Scott  V.  Armstrong,  14G  U.  S.  499,  13  Sup.  Ct.  148,  3G  L.  Ed. 


424  NATIONAL   BANKS  (Ch.  12 

ence,  not  to  the  giving  of  security  when  a  debt  is  created,  and 
if  the  transaction  is  free  from  fraud  in  fact,  and  is  intended 
merely  to  protect  a  loan  made  at  the  time,  the  creditor  can  re- 
tain the  property  transferred  as  security  until  the  debt  is  paid, 
though  the  bank  was  insolvent  and  the  creditor  had  reason  to 
believe  that  to  be  a  fact.^"^  But  if,  as  part  of  the  same  transac- 
tion, it  is  agreed  that  the  security  shall  also  stand  as  security 
for  an  antecedent  debt,  to  that  extent,  at  least,  the  transaction  is 
void.-"^  So,  in  an  action  by  the  receiver  on  a  note,  the  maker 
may  plead  as  an  equitable  set-off  any  debt  due  from  the  bank 
to  him  existing  at  the  time  of  its  failure,  although  the  note 
did  not  mature  until  after  the  insolvency,  and  the  allowance 
of  such  set-off  is  not  a  preference,  since  it  is  only  the  balance, 
if  any,  after  the  set-off  is  deducted,  that  can  justly  be  held  to 
form  part  of  the  assets  of  the  insolvent.-''^     The  set-off  may 

1059  (cf.  Yardley  v.  Pliiller,  167  U._S.  344,  17  Sup.  Ct.  835,  42  L.  Ed. 
192).     See,  also,  In  re '  Armstroug  (C.  C.)  41  Fed.  381. 

The  suspension  of  the  bank  and  the  appointment  of  a  receiver  do 
not  defeat  a  right  previously  acquired  by  service  of  an  attachment 
against  the  bank  as  garnishee ;  but  the  assets  pass  to  the  receiver 
burdened  with  a  lien  in  favor  of  the  plaintiff  in  the  attachment, 
which  cannot  be  disregarded  or  displaced  by  the  comptroller.  Earle 
V.  Pennsylvania,  Use  of  Commonwealth  Title  Ins.  &  Trust  Co.,  178 
U.  S.  449,  20  Sup.  Ct.  915,  44  L.  Ed.  114G. 

When  the  bank  is  placed  in  the  hands  of  a  receiver,  the  federal 
law  is  the  law  of  the  disti'ibution  of  its  assets  as  against  the  state 
law,  and  determines  whether  a  prior  transaction  gave  rise  to  a  right 
to  a  preference.  First  Nat.  Bank  v.  Selden.  120  Fed.  212,  56  C.  C. 
A.  532,  62  L.  R.  A.  559.  See  -'Banlcs  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  k88;    Cent.  Dig.  §§  1105-1121. 

201  Armstrong  v.  Chemical  Nat.  Bank  (C.  C.)  41  Fed.  234,  6  L.  R. 
A.  226.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  288;  Cent. 
Dig.  §§  110.5-1127. 

202  Stapylton  v.  Stockton,  91  Fed.  327,  33  C.  C.  A.  542  (holding 
that  if  the  creditor  acts  in  good  faith  and  in  the  belief  that  the 
bank  is  solvent,  he  may  avail  himself  of  the  security  to  the  extent 
of  his  present  advances).  See  ''Banks  and  Bunking,"  Dec.  Dig.  {Key 
No.)  §  288;    Cent.  Dig.  §§  1105-1127. 

203  Scott  v.  Armstrong,  146  U.  S.  499,  13  Sup.  Ct.  14S.  36  L.  Ed. 


§    111)       ATTACHMENTS,  INJUNCTIONS,  AND  EXKCUTIONS        425 

be  pleaded  in  an  action  at  law.-"'*  It  is  otherwise  if  the  claim 
souj4ht  to  be  set  off  was  acquired  after  an  act  of  insolvency, 
for  the  rights  of  the  parties  become  fixed  at  that  time.-"^ 


ATTACHMENTS,  INJUNCTIONS,  AND  EXECU- 
TIONS 

111.  No  attachment,  injunction,  or  execution  may  be  issued 
against  a  national  bank  or  its  property,  before  final 
judgment  in  any  suit,  action,  or  proceeding,  in 
any  state,  county,  or  municipal  court. 

The  provision  against  the  issue  of  attachments,  injunctions, 
and  executions,  already  referred  to,  was  not  in  the  original 
bank  act.  but  was  added  in  1873  as  a  proviso  to  another  sec- 
tion, and  was  in  the  Revision  placed  where  it  now  stands, ^°* 
thus  indicating-  that  it  was  intended  as  aa  aid  to  the  enforce- 
ment of  the  principle  of  equality  among  creditors.^*''^  Even 
before  its  enactment,  it  was  held  that  the  then  provisions  of 
the  act  manifested  a  design  to  secure  the  government  against 
its  payment  of  the  bank's  circulating  notes  and  to  secure  the 
assets  of  the  bank  for  ratable  distribution  among  the  general 

1059;    Mercer  v.  Dyer,  15  Mont.  317,  39  Pac.  314.     .S'cc  "Banks  and 
Banking,"  Dec.  Dig.  {Key  'So.)  §  28S;    Cent.  Dig.  §§  1105-1121. 

204  Yardley  v.  Clothier,  51  Fed.  506,  2  C.  C.  A.  349,  17  L.  R.  A.  462 ; 
Adams  v.  Spokane  Drug  Co.  (C.  C.)  57  Fed.  SSS,  23  L.  R.  A.  334; 
Armstrong  v.  Warner,  49  Ohio  St.  376,  31  N.  E.  877,  17  L.  R.  A.  460. 
See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  28S;  Cent.  Dig. 
§§  1105-1127. 

205  Davis  V.  Knipp,  02  Hun,  297,  36  N.  Y.  Supp.  705;  Venango 
Nat.  Bank  v.  Taylor,  50  Fa.  14;  Beckham  v.  Shackelford,  8  Tex.  Civ. 
App.  660,  29  S.  W,  200.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
Xo.)  §  2S8;      Cent.  Dig.  §§  1105-1121. 

206  Rev.  St.  U.  S.  §  5242  (U.  S.  Comp.  St.  1901,  p.  3517) ;  auto, 
p.  421. 

207  See  Pacific  Nat.  Bank  v,  Mixter,  124  U.  S.  721,  8  Sup.  Ct.  718. 
31  L.  Ed.  567.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Ko.)  §§ 
218-2S0y2;   Cent.  Dig.  §§  1067-1014. 


/ 

426  NATIONAL  BANKS  (Ch.  12 

creditors,  and  that  the  property  of  a  bank,  attached  at  the 
suit  of  an  individual  creditor  after  the  bank  had  become  in- 
solvent, could  not  be  subjected  to  sale  for  the  payment  of  his 
demand,  against  the  claim  for  the  property  of  a  receiver  sub- 
sequently appointed. -"^  By  virtue  of  the  amendment  it  stands 
as  the  paramount  law  of  the  land  that  attachments  shall  not 
issue  from  state  courts  against  national  banks,  so  that  all  the 
attachment  laws  of  the  states  must  be  read  as  if  they  contained 
a  proviso  in  express  terms  that  they  are  not  to  apply  to  suits 
against  a  national  bank.-"*  The  prohribition  does  not  in  ex- 
press terms  refer  to  attachments  in  suits  begun  in  the  federal 
courts ;  but  it  has  been  held  that  by  virtue  of  Rev.  St.  U.  S.  § 
915  (U.  S.  Comp.  St.  1901,  p.  684),  entitling  the  plaintiff  in  ac- 
tions in  the  federal  courts  to  similar  remedies  by  attachment  as 
those  provided  by  the  laws  of  the  state,  a  federal  court  cannot 
issue  a  writ  of  attachment  before  final  judgment  against  a  na- 
tional bank,  its  jurisdiction  being  limited  by  all  the  restrictions 
imposed  upon  the  state  courts. ^^^  A  national  bank,  whether 
solvent  or  insolvent,  is  within  the  exemption  from  the  issue  of 
attachment  before  judgment  which  the  act  affords  in  suits  in 
state  courts;  and  jurisdiction  over  the  person  or  property  of 
a  national  barlk  is  not  acquired  by  the  issue  of  an  attachment 
out  of  a  state  court  before  judgment.-^^     A  garnishment  is 

208  First  Nat.  Bank  v.  Colby,  21  Wall.  609,  22  L.  Ed.  687.  See 
•'Banks  and  Bankinr/,"  Dec.  Dig.  (Key  Xo.)  §§  27S-280y2;  Cent.  Dig. 
§§  1067-107-',. 

2«0  9  Pacific  Nat.  Bank  v.  Mixter,  124  U.  S.  721,  8  Sup.  Ct.  718,  31 
L.  Ed.  567.  See  "Banks  and  Banking,'"  Dec.  Dig.  (Key  No.)  §  278; 
Cent.  Dig.  §§  1067-1069. 

210  Pacific  Nat.  Bank  v.  Mixter,  124  U.  S.  721,  8  Sui).  Ct.  718,  31 
L.  Ed.  567.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  27S; 
Cent.  Dig.  §§  1067-1069. 

211  Van  Reed  v.  People's  Nat.  Bank,  198  U.  S.  554,  25  Sup.  Ct.  775. 
49  L.  Ed.  1161. 

No  right  to  attachment  against  a  national  bank  before  judgment 
in  a  suit  in  a  state  court  is  given  by  Act  July  12,  1SS2,  c.  290,  §  4, 
22  Stat.  163  (U.  S.  Comp.  St.  1901,  p.  3458),  making  the  jurisdiction 
for  suits  by  or  against  national  banks  the  same  as  the  jurisdiction 


§    111)       ATTACIIMKNTS,  INJUNCTIONS,  AND  KXECUTIONS        427 

not  an  attachment  within  this  provision;  but  a  state  court 
has  no  authority  to  order  execution  against  a  bank  in  the 
hands  of  a  receiver,  by  reason  thereof,  although  the  rights  thus 
acquired  must  be  recognized  by  the  comptroller.'" 

The  provision  against  the  issue  of  injunctions,  like  that 
against  attachments,  is  not  limited  to  insolvent  banks.-^^  It  is 
meant  not  merely  to  preserve  to  national  banks  control  of 
their  general  assets,  but  applies  to  an  order  restraining  the 
transfer  or  enforcement  of  notes  as  wrongfully  pledged  to  a 
bank  without  notice.^^*  It  prevents  the  issue  of  any  such  writ 
in  a  state  court.^^^ 

for  suits  by  or  against  banks  not  organized  under  any  law  of  tbe 
United  States.  Van  Reed  v.  People's  Nat.  Bank,  supra.  Cf.  Corn 
Exchange  Bank  of  Chicago  v.  Blye,  101  N.  Y.  303,  4  N.  E.  G35.  See 
-Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  21S;  Cent.  Dig.  §§" 
1067-1069. 

212  Earle  v.  Pennsylvania,  Use  of  Commonwealth  Title  Ins.  &  Trust 
Co.,  178  U.  S.  449.  20  Sup.  Ct.  915,  44  L.  Ed.  1146.  See  ''Banks  and 
Ba)a-ing,"  Dec.  Dig.  (Key  Xo.)  §  77;   Cent.  Dig.  §§  165-116-^0. 

213  Pacific  Nat.  Bank  v.  Mixter,  124  U.  S.  721,  S  Sup.  Ct.  718;  31  L. 
Ed.  507;  Freeman  Mfg.  Co.  v.  National  Bank  of  the  Republic,  IGO 
Mass.  398,  35  N.  E.  805.  Cf.  Cogswell  v.  Second  Nat.  Bank,  76  Conn. 
252,  56  Atl?  575.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  2\^o.)  § 
279;    Cent.  Dig.  §  1070. 

214  Freeman  Mfg.  Co.  v.  National  P.ank  of  the  Republic,  160  Mass. 
398,  35  N.  E.  865. 

Rev.  St.  U.  S.  §  5242  (U.  S.  Comp.  St.  1901,  p.  3517),  was  not  re- 
pealed by  Act  July  12,  1n82.  c.  290.  §  4,  22  Stat.  103  (U.  S.  Comp. 
St.  1901,  p.  345S;),  making  the. jurisdiction  of  suits  against  them  the 
same  as  those  against  other  banks  which  are  or  might  be  in  the  same 
place,  nor  by  Act  Aug.  13,  1888,  c.  SCO,  §  4,  25  Stat.  436  (U.  S.  Comp. 
St.  1901,  p.  514),  declaring  them,  for  the  purpose  of  suit,  citizens  of 
their  respective  states,  and  federal  jurisdiction  so  far  the  same  for 
them  as  for  individuals.  Freeman  Mfg.  Co.  v.  National  Bank  of  the 
Republic,  supra.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
279;   Cent.  Dig.  §  1070. 

215  Meyer  v.  First  Nat.  Bank  of  Copur  d'Alene,  10  Idaho,  175,  77 
Pac.  334.  See,  also,  Ilazen  v.  Lyndonville  Nat.  Bank.  70  Vt.  543, 
41  Atl.  1046,  67  Am.  St.  Rep.  680.  See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  Xo.)  §  279;   Cent.  Dig.  §  1070. 


428  NATIONAL   BANKS  (Ch.  12 

ACTIONS   BY   AND   AGAINST   NATIONAL  BANKS 

112.  Suits,  actions,  and  proceedings  against  a  national  bank 
may  be  had  in  any  district  court  of  the  United 
States  held  within  the  district  in  which  the  bank 
may  be  established,  or  in  any  state,  county,  or  mu- 
nicipal court  in  the  county  or  city  in  which  the 
bank  is  located  having  jurisdiction  in  similar  cases. 
The  federal  district  courts  have  original  jurisdic- 
tion of  all  cases  commenced  by  the  United  States, 
or  by  direction  of  any  officer  thereof,  against  any 
national  bank,  and  of  cases  for  winding  up  the  af- 
fairs of  any  such  bank,  and  of  all  suits  brought  by 
any  such  bank  established  in  the  district  for  which 
the  bank  is  held,  to  enjoin  the  comptroller  of  the 
currency,  or  any  receiver  acting  under  his  direc- 
tion, as  provided  by  the  National  Bank  Act.  All 
national  banks,  for  the  purposes  of  all  other  actions 
by  or  against  them,  real,  personal,  or  mixed,  and 
all  suits  in  equity,  are  to  be  deemed  citizens  of  the 
states  in  which  they  are  respectively  located. 

In  General 

Among  the  powers  conferred  by  the  National  Bank  Act  of 
June  3,  1864,  upon  national  banks,  is  the  power  "to  sue  and 
be  sued,  complain  and  defend,  in  any  court  of  law  and  equity, 
as  fully  as  natural  persons."  ~^^  The  question  as  to  the  proper 
court  in  which  the  suit  is  to  be  brought,  in  respect  to  juris- 
diction, is  to  be  determined  by  other  provisions. ^^  These  pro- 
visions have  been  changed,  so  far  as  concerns  the  jurisdiction 

2i«  Rev.  St.  U.  S.  §  51.3G  (U.  S.  Comp.  St.  1901,  p.  3455) ;  Act  June 
3,  1864,  c.  100,  §  S,  13  Stat.  101. 

217  See  Manufacturers'  Nat.  Bank  v.  Baack,  Fed.  Cas.  No.  9,052, 
8  Blatchf.  137.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  Xo.)  § 
275;    Cent.  Dig.  §§  1056-1066. 


§    112)  ACTIONS  BY  AND  AGAINST  NATIONAL  BANKS  429 

of  the  federal  courts,  by  the  recent  act,  which  aboHshes  the 
circuit  courts,  and  gives  original  jurisdictions  in  matters  for- 
merly appertaining-  to  them  to  the  district  courts  and  which 
prescribes  the  cases,  by  and  against  national  banks,  in  which 
the  district  courts  shall  have  jurisdiction.  To  the  understand- 
ing of  the  present  law  it  will  be  necessary  to  set  out  briefly 
the  law  as  it  stood  before  the  recent  enactment. 

Jurisdiction  Under  Original  Act 

By  the  act  of  June  3,  1864,  it  was  declared  that  suits,  ac- 
tions, and  proceedings  against  any  association  "may  be  had 
in  any  circuit,  district  or  territorial  court  of  the  United  States 
held  within  the  district  in  which  such  association  may  be  es- 
tablished, or  in  any  state,  county  or  municipal  court  in  the 
county  or  city  in  which  said  association  is  located  having  ju- 
risdiction in  similar  cases:  Provided,  however,  that  all  pro- 
ceedings to  enjoin  the  comptroller  under  this  act  shall  be  had 
in  a  circuit,  district  or  territorial  court  of  the  United  States 
held  in  the  district  in  which  such  association  is  located."  ^^* 
The  revision  omitted  the  last  provision,  but  this  was  remedied 
in  1875  by  an  amendment,  which  added  the  same  provision, 
except  the  proviso,  to  Rev.  St.  §  5198.-'"  The  Revised  Stat- 
utes provided,  also,  that  the  district  courts  should  have  juris- 
diction "of  all  suits  by  or  against  any  association  *  *  * 
v/ithin  the  district  for  which  the  court  is  held,"  --"  and  that 
the  circuit  courts  should  have  original  jurisdiction  "of  all  suits 
by  or  against  any  banking  association  established  in  the  dis- 
trict for  which  the  court  is  held,  under  any  law  providing  for 
national  banking  associations."  --'     As  the  law  thus  stood, 

218  Act  June  3,  1SG4,  e.  lOG,  §  57,  13  Stat.  IIG. 

219  Act  Feb.  18,  1875,  c.  80,  18  Stat.  320  (U.  S.  Comp.  St.  1901,  p. 
3493).  See  First  Nat.  Bank  v.  Morgan.  132  U.  S.  141,,  10  Sup.  Ct. 
37,  33  L.  Ed.  282.  8ee  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  § 
275;   Cent.  Dig.  §§  10 56-10 66. 

220  Rev.  St.  U.  S.  §  5G3,  subd.  15  (U.  S.  Comp.  St.  19U1,  p.  459). 

221  Rev.  Stat.  U.  S.  §  G29,  subds.  10,  11  (U.  S.  Comp.  St.  1001,  p. 
505). 


430  NATIONAL  BANKS  (Ch.  12 

the  federal  courts  had  jurisdiction  over  national  banks,  irre- 
spective of  the  subject-matter  -'~  or  the  citizenship  of  the  par- 
ties,--^ and  the  state  courts  had  concurrent  jurisdiction.--* 

Later  Provisions  as  to  Citizenship 

By  act  of  July  12,  1882,  it  was  provided  that  jurisdiction 
for  suits  brought  by  or  against  national  banks,  except  suits 
between  them  and  the  United  States,  or  its  officers  and  agents, 
should  be  the  same  as  the  jurisdiction  for  suits  by  or  against 
banks  not  organized  under  any  law  of  the  United  States  doing 
business  in  the  same  place.-'-' ^  This  act  put  national  banks 
en  the  same  footmg  as  banks  of  the  state  where  they  were 
located  for  the  purposes  of  jurisdiction  of  the  federal  courts, 
so  that  a  national  bank  could  not  sue  in  a  federal  court  mere- 
ly by  reason  of  the  source  of  its  incorporation.--®  The  fore- 
going provision  was  superseded  by  enactments  in  1887  and 
1888,  by  which  it  was  provided  that  all  national  banking  as- 
sociations should,  for  the  purposes  of  all  actions  against  them, 
real,  personal,  or  mixed,  and  all  suits  in  equity,  be  deemed 
citizens  of  the  states  in  which  they  were  respectively  located, 
^and.that  in  such  cases  the  circuit  and  district  courts  should 

2  22  Foss  V.  First  Nat.  Bank  (C.  C.)  3  Fed.  185.  See  ''Banks  and 
Banking,"  Dec.  Dig.  iKeg  Xo  )  §  215;    Cent.  Dig.  §§  1056-1066. 

2  23  Wilson  County  v.  Tliird  Nat.  Bank,  103  U.  S.  770,  26  L.  Ed. 
488.  See  "Banks  and  Banking,''  Dee.  Dig.  (Key  Xo.)  §  275;  Cent. 
Dig.  §§  1056-1066;  "Courts;'  Dec.  Dig.  {Key  No.)  §§  29-i,  ^89;  Cent. 
Dig.  §  856'. 

224Claflin  V.  Houseman,  93  U.  S.  130,  23  L.  Ed.  833;  First  Nat. 
Bank  v.  Morgan,  132  U.  S.  141,  10  Sup.  Ct.  37,  33  L.  Ed.  282; 
Briuckerhoff  v.  Bostwick,  88  N.  Y.  52  See  "Banks  and  Banking," 
Dec.  Dig.  {Keg  No.)  §  275;  Cent.  Dig.  §§  1056-1066;  "Courts,"  Dec. 
Dig.  {Key  No.)  §  489;    Cent.  Dig.  §  1336. 

225  Act  July  13,  1S82,  c.  290,  §  4,  22  Stat.  163.  See  Whittemore  v. 
Amoskeag  Nat.  Bank,  134  U.  S.  527,  10  Sup.  Ct.  592,  33  L.  Ed.  1002. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  275;  Cent.  Dig.  §,§ 
1056-1066. 

2  26  Leather  Manufacturers'  Nat.  Bank  v.  Cooper,  120  U.  S.  778,  7 
Sup.  Ct.  777,  30  L.  Ed.  816.  See  "Banks  and  Banking,"  Dec.  Dig. 
{Key  No.)  §  775;   Cent.  Dig.  §§  1056-1066. 


§112)  ACTIONS  BY  AND  AGAINST  NATIONAL  KANKS  4.'U 

not  have  jurisdiction  other  than  such  as  they  would  have  in 
cases  between  individual  citizens  of  the  same  state — these  pro- 
visions not  to  affect  the  jurisdiction  of  the  United  States 
courts  in  cases  commenced  by  the  United  States  or  by  direc- 
tion of  any  officer  thereof,  or  cases  for  winding  up  the  affairs 
of  any  such  bank.--^  "The  necessary  effect  of  this  legisla- 
tion was  to  make  national  banks,  for  the  purpose  of  suing  and 
being  sued  in  the  circuit  courts  of  the  United  States,  citizens 
of  the  states  in  which  they  were  respectively  located,  and  to 
withdraw  from  them  the  right  to  invoke  the  jurisdiction  of  the 
circuit  courts  *  *  *  simply  upon  the  ground  that  they 
were  created  by,  and  exercised  their  powers  under,  acts  of 
Congress.  *  *  *  Qf  course'  *  *  *  there  remained  to 
a  national  bank,  independently  of  its  federal  origin,  and  as  a 
citizen  of  the  state  in  which  it  was  located,  the  right  to  invoke 
the  federal  jurisdiction  of  the  circuit  courts  in  any  suit  involv- 
ing the  required  amount,  and  which  by  reason  of  its  subject- 
matter,  and  not  by  reason  simply  of  the  federal  origin  of  the 
bank,  was  a  suit  arising  under  the  constitution  and  laws  of 
the  United  States."  -'' 

227  Act  March  3,  ISST,  c.  373,  §  4,  24  Stat.  554.  and  Act  Aug.  13, 
18S8,  c.  8GG,  §  4,  25  Stat.  43G  (U.  S.  Conip.  St.  1901,  p.  514). 

2  28  Continental  Nat.  Bank  v.  Buford,  191  U.  S.  119,  24  Sup.  Ct. 
54,  48  L.  Ed.  119.  See,  also,  Petri  v.  Commercial  Nat.  Bank,  142  U. 
S.  644,  12  Sup.  Ct.  325,  35  L.  Ed.  1144;  Ex  parte  Jones,  164  U.  S. 
691,  17  Sup.  Ct.  222,  41  L.  Ed.  601;  Guthrie  v.  Harkness,  199  U. 
S.  148.  26  Sup.  Ct.  4,  50  L.  Ed.  130;  Wjman  v.  WaUace,  201  U.  S. 
230,  26  Sup.  Ct.  495,  50  L.  Ed.  738 ;  Walker  v.  Windsor  Nat.  Bank, 
56  Fed.  76,  5  C.  C.  A.  421;  Andrews  v.  Thum,  64  Fed.  149,  12  C. 
C.  A.  77.  Review  of  decision  of  state  courts  involving  federal  ques- 
tion, see  Miller  v.  National  Bank  of  Lancaster,  106  U.  S.  542,  1  Sup. 
Ct.  536,  27  L.  Ed.  289 ;  Union  Nat.  Bank  v.  Louisville,  N.  ^A.  &  C. 
R.  Co.,  163  U.  S.  325,  16  Sup.  Ct.  1039,  41  L.  Ed.  177 ;  ,  McCormick 
v.  Market  Nat.  Bank,  165  U.  S.  538,  17  Sup.  Ct.  433,  41  L.  Ed.  817 ; 
Leyson  v.  Davis,  170  U.  fi.  36,  18  Sup.  Ct.  500,  42  L.  Ed.  939;  Capi- 
tal Nat.  Bank  v.  First  Nat.  Bank,  172  U.  S.  425,  19  Sup.  Ct.  202, 
43  L.  Ed.  502;  Seelierger  v.  McCormick.  175  U.  S.  274,  20  Sup.  Ct. 
128,  44  L.  Ed.  161 ;   Talbot  v.  Sioux  Nat.  Bank,  185  U.  S.  182,  22  Sup. 


432  NATIONAL  BANKS  (Ch.  12 

Actions  by  and  Against  Receivers 

A  receiver  is  an  officer  of  the  government,  and  an  action 
against  him  in  his  representative  capacity  is  one  arising  under 
the  laws  of  the  United  States,  and  jurisdiction  of  the  circuit 
court  therein  was  not  dependent  on  diversity  of  citizenship  of 
the  parties.--^  And  so  of  an  action  against  an  "agent,"  sub- 
stituted for  the  receiver  in  vohuitary  liquidation ;  the  action 
being  one  to  wind  up  the  affairs- of  the  bank.^^°  Similarly, 
an  action  may  be  maintained  by  a  receiver  -^^  or  agent. "^- 

Ct.  621,  46  L.  Ed.  862;  Rankin  v.  Barton,  199  U.  S.  228,  26  Snp. 
Ct.  29,  50  L,  Ed.  163.  Sec  "Banlcs  and  Banlcing,"  Dec.  Dig.  {Key 
'No.)  §  215;  Cent.  Dig.  §§  1056-1066;  "Courts,"  Dec.  Dig.  {Key  No.)  § 
29 Jf;    Cent.  Dig.  §  836. 

229  Auten  V.  United  States  Nat.  Bank,  174  U.  S.  125,  19  Sup.  Ct. 
628,  43  L.  Ed.  920;  McDonald  v.  State  of  Nebraska,  101  Fed.  171, 
41  C.  C.  A.  278. 

A  case  arising  under  the  laws  of  the  United  States  was  presented 
by  a  bill  filed  by  the  holder  of  a  nounegotiable  note,  given  by  a  bank 
which  afterwards  went  into  voluntary  liquidation,  to  enforce  the 
stockholders'  liability.  Wyman  v.  Wallace,  201  U.  S.  230,  20  Sup. 
Ct.  495,  50  L.  Ed.  738.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §§  275,  2S7;  Cent.  Dig.  §§  1009-1105;  "Courts,"  Dec.  Dig.  {Key 
No.)  §  29Jt;   Cent.  Dig.  §  836. 

230  Weeks  v.  International  Trust  Co.,  125  Fed.  370,  60  C.  C.  A. 
236;  International  Trust  Co.  v.  Weeks,  203  U.  S.  364,  27  Sup.  Ct. 
69,  51  L.  Ed.  224.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  § 
275;  Cent.  Dig.  %^  1056-1066;  "Courts,"  Dee.  Dig.  {Key  No.)  §  29.J; 
Cent.  Dig.  §  836. 

231  Short  v.  Hepburn,  75  Fed.  113,  21  C.  0.  A.  252;  Lake  Nat. 
Bank  v.  Wolfeborough  Sav.  Bank,  78  Fed.  517,  24  C.  C.  A.  195; 
Myers  v.  Hettinger,  94  Fed.  370,  37  C.  C.  A.  369;  McCartney  v. 
Earle,  115  Fed.  462,  53  C.  C.  A.  392 ;  Murray  v.  Chambers  (C.  C.)  151 
Fed.  142. 

Such  jurisdiction  is  lost  by  a  sale  and  transfer  of  the  receiver's 
interest  in  the  subject-matter.  Weaver  v.  Kelly,  92  Fed.  417,  34  C. 
C.  A.  423.  -See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  275; 
Cent.  Dig.  §§  1056-1066,  1099-1105. 

232  McConvllle  v.  Gilmour  (C.  C.)  36  Fed.  277,  1  L.  R.  A.  49S. 
See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  275;  Ckint.  Dig.  §§ 
1056-1066,  1099-1105. 


§    112)  ACTIONS  BY  AND  AGAINST  NATIONAI.  BANKS  433 

Removal 

The  same  considerations  govern  the  right  of  removal  from 
a  state  to  a  federal  court.  The  Ijank  cannot  remove  on  the 
mere  ground  that  it  is  a  national  bank,  but  must  establish  the 
right  upon  some  other  ground. -^^  An  action  against  a  re- 
ceiver "•*  or  "agent"  is  removable,  but  not  an  action  in  which 
the  receiver  is  not  a  necessary  party,  as  where  he  is  admitted 
as  a  party  in  an  action  which  was  pending  against  the  bank 
at  the  time  of  his  appointment."''' 
CJianges  by  Act  of  1911 

By  an  act  to  codify,  revise,  and  amend  the  laws  relating  to 
the  judiciary,  which  took  effect  January  1,  1912,  important 
changes  affecting  the  jurisdiction  of  the  federal  courts  have 
been  made.  The  act  repeals  the  former  provisions  conferring 
jurisdiction  upon  the  district  courts  and  upon  the  circuit 
courts,-'"  as  well  as  the  provisions  of  the  acts  of  1887  and 
1888  above  referred  to.-'^  It  provides,  among  other  things, 
that  "the  district  courts  shall  have  original  jurisdiction  as 
follows :  *  *  *'  Of  air  cases  commenced;  by  the  United 
States,  or  by  direction  of  any  officer  thereof,  against  any  na- 
tional banking  association,  and  cases  for  winding  up  the  af- 

233  Leather  Manufacturers'  Nat.  P.ank  v.  Cooper,  120  U.  S.  778, 
7  Sup.  Ct.  777,  30  L.  Ed.  SIG ;  Wichita  Nat.  Bank  v.  Smith,  72  Fed. 
568,  19  C.  C.  A.  42;  Speckert  v.  German  Nat.  Bank,  9S  Fed.  151, 
38  C.  C.  A.  G82.  See,  also,  Petri  v.  Commercial  Nat.  Bank,  142  U. 
S.  644,  12  Sup.  Ct.  325,  35  L.  Ed.  1144.  See  ''Removal  of  Causes," 
Dec.  Dig.  {Key  Ko.)  §§  19,  20,  30,  72,  82;    Cent.  Dig.  §§  37~47. 

234  Grant  v.  Spokane  Nat.  Bank  (C.  C.)  47  Fed.  673;  Hot  Springs 
Independent  School  Dist.  No.  10  of  Fall  River  County  v.  First  Nat. 
Bank  (C.  C.)  61  Fed.  417;  Guarantee  Co.  of  North  Dakota  v.  Hall- 
way, 104  Fed.  369,  44  C.  C.  A.  312.  See  "Banks  and  Banking;'  Dec. 
Dig.  {Key  l\'o.)  §§  19,  20,  32;    Cent.  Dig.  §§  37-47,  So. 

23  5  Speckert  v.  German  Nat.  Bank,  98  Fed.  151,  38  C.  C.  A.  682. 
See  "Banks  and  Banking;'  Dec.  Dig.  {Key  Xo.)  §§  19,  iO,  32;  Cent. 
Dig.  §§  37-^7,  75. 

236  Rev.  St.  U.  S.  §§  563,  629  (U.  S.  Comp.  St.  1901,  pp.  455,  503). 
For  repeal,  see  Act  March  3,  1911,  c.  231,  §  297,  36  Stat.  1168. 

23  7  Ante,  p.  430. 

Tiff.Bks.&  B.— 28 


434  NATIONAL   BANKS  (Ch.  12 

fairs  of  any  such  bank,  and  of  all  suits  brought  by  any  bank- 
ing association  established  in  the  district  for  which  the  court 
is  held,  under  the  provisions  of  the  title  'National  Banks,'  Re- 
vised Statutes,  to  enjoin  the  comptroller  of  the  currency,  or 
any  receiver  acting  under  his  direction,  as  provided  by  said 
title.  And  all  such  associations  established  under  the  laws 
of  the  United  States  shall,  for  the  purposes  of  all  other  ac- 
tions by  or  against  them,  real,  personal,  or  mixed,  and  all  suits 
in  equity,  be  deemed  citizens  of  the  states  in  which  they  are 
respectively  located."  ^^^ 

It  seems  that  the  effect  of  this  legislation,  except  for  the 
abolition  of  the  circuit  courts  and  the  transfer  of  all  original 
federal  jurisdiction  to  the  district  courts,  is  to  leave  unchanged 
the  law  in  respect  to  the  jurisdiction  of  the  federal  courts  and 
the  state  courts,  respectively,  in  national  bank  cases. 

TAXATION  BY  STATES 

113.  The  shares  of  stock  in  a  national  bank  are  subject  to 
taxation  by  the  state  in  which  the  bank  is  located, 
and  the  legislature  may  direct  and  determine  the 
manner  and  place  of  taxing  the  shares,  subject  to 
the  restrictions:  (1)  That  the  taxation  shall  not 
be  at  a  greater  rate  than  is  assessed  upon  other 
moneyed  capital  in  the  hands  of  individual  citizens 
of  the  states;  and  (2)  that  the  shares  owned  by 
nonresidents  shall  be  taxed  in  the  city  or  town 
where  the  bank  is  located.  The  real  property  of 
the  bank  is  subject  to  state,  county,  and  municipal 
taxes,  to  the  same  extent,  according  to  its  value,  as 
other  real  property. 

In  General 

.  By  the  act  of  June  3,  1864,  in  lieu  of  all  existing  taxes, 
national  banks  were  required  to  pay  to  the  treasurer  of  the 

23  8  Act  March  3,  1911,  c.  2:11.  §  24  (1(>).  30  Stat.  1091. 


§    113)  TAXATION    BY    STATES  435 

United  States  a  duty  of  certain  percentages  upon  the  average 
amounts  of  their  notes  in  circulation,  their  deiKjsits,  and  their 
capital  stock.-^^  Another  section  of  the  act  provicles  that 
"nothing  herein  shall  ])rcveiit  all  the  shares  in  any  association 
from  being  included  in  the  valuation  of  the  personal  property 
of  the  owner  or  holder  *  *  *  in  assessing  taxes  imposed 
by  authority  of  the  state  in  which  the  association  is  located," 
and  provides  for  the  taxation  of  the  shares  and  of  the  real 
property  as  set  forth  in  the  black  letter  text.^*° 
Power  of  Congress  and  States 

National  banks  being  instruments  designed  to  be  used  to 
aid  the  government  in  the  administration  of  the  public  service, 
and  appropriate  means  to  that  end,  of  which  Congress  is  the 
sole  judge,  the  state  can  exercise  no  control  over  them,  by 
taxation  or  otherwise,  except  as  Congress  may  see  proper  to 
permit,-*^  and  the  provisions  of  the  act  concerning  taxation 
are  constitutional.-*^  Such  provision  was  necessary  to  au- 
thorize the  states  to  impose  any  tax  whatever  on  the  bank 
shares,  and  as  Congress  was  thus  conferring  a  power  on  the 
states,  which  they  would  not  otherwise  have,  to  tax  such 
shares,  it  imposed  a  restriction  on  the  exercise  of  the  power 

239  Rev.  St.  U.  S.  §  5214  (U.  S.  Coiiip.  St.  1901,  p.  Sr.OO).  This  sec- 
tion has  been  amended  by  Act  May  30,  1908,  e.  229,  §  9,  35  Stat. 
550  (U.  S.,  Comp.  St.  Supp.  1909,  p.  1332).  See,  also,  Rev.  St.  U.  S. 
§§  5215-5218  (U.  S.  Conip.  St.  1901,  pp.  3501,  3502);  Act  March  14, 
1900,  c.  41,  §  13,  31  Stat.  49  (U.  S.  Comp.  St.  1901,  p.  3501) ;  Act 
Dee.  21,  1905,  c.  3,  §  1,  34  Stat.  5  (U.  S.  Comp.  St.  Supp.  1909,  p. 
9.35). 

240  Rev.  St.  U.  S.  §  5219  (U.  S.  Comp.  St.  1901,  p.  3502).  See,  also. 
Rev.  St.  U.  S.  §  5210  (U.  S.  Comp.  St.  1901,  p.  3498). 

241  Farmers'  &  Mechanic's'  Bank  v.  Dearing,  91  U.  S.  29,  23  L.  Ed. 
196 ;  Owensboro  Nat.  Bank  v.  Owensboro,  173  U.  S,  664,  19  Sup.  Ct. 
537,  43  L.  Ed.  850;  First  Nat.  Bank  of  Albuquerque  v.  Albright,  208 
U7  S.  548,  28  Sup.  Ct.  349.  52  L.  Ed.  614.  See  "Taxation,"  Dec.  Dip. 
(Key  No.)  §  10;    Cent.  Di(f.  §§  23-26.  • 

242  Van  Allen  v.  Assessors,  3  Wall.  573,  IS  L.  Ed.  229;  Bradley  v. 
Illinois,  4  Wall.  459,  IS  L.  Ed.  433.  See  "Taxation,"  Dec.  Di<j.  (Key- 
No.)  §  10;    Cent.  Diy.  §§  23-26. 


436  NATIONAL   BANKS  (Ch.  12 

designed  to  prevent  discriminatory  taxation  permitting  the 
states  to  tax  the  shares  as  the  personal  property  of  the  owner 
to  the  same  extent  as  other  moneyed  capital  invested  in  the 
state,  and  to  tax  the  real  estate  as  other  real  estate  is  taxed. -*^ 
The  power  so  conferred  extends  to  the  territories.^**  The 
power  of  the  states  to  tax  being  thus  confined  to  the  shares 
and  to  the  real  estate,  it  follows  that  a  tax  imposed  upon  the 
franchise  of  a  bank,  not  being  levied  upon  the  shares  in  the 
names  of  the  shareholders,  is  invalid.-*^  And  so  of  a  tax  upon 
all  the  intangible  property  of  the  bank.-*®  Its  personal  prop- 
erty cannot  be  taxed. ^*''  The  bank  itself  can  be  taxed  only  on 
its  real  estate.-*^  A  tax  cannot  be  imposed  upon  the  presi- 
dent.-*'' 

Capital  and  Shares 

The  capital  stock  cannot  be  taxed  as  such  by  authority  of 
the  state;   the  only  way  it  can  be  reached  being  by  assessment 

243  New  York  ex  rel.  Williams  v.  Weav.er,  100  U.  S.  539,  2.o  L. 
Ed.  705.  See  "Taxation,"  Dec.  Dig.  (Key  No.)  §  10;  Cent.  Dig.  §§ 
23-26. 

244  Talbott  V.  Silver  Bow  County.  139  U.  S.  438,  11  Sup.  Ct.  594, 
35  L.  Ed.  210.  See  "Taxation,"  Dec.  Dig.  (Key  No.)  §  10;  Cent. 
Dig.  §§  23-26. 

245  Third  Nat.  Bank  v.  Stone,  174  U.  S.  432,  19  Sup.  Ct.  759.  43  L. 
Ed.  1035.  See  "Taxation,''  Dec.  Dig.  (Key  No.)  §  10;  Cent.  Dig.  §§ 
23-26. 

246  Owensboro  Nat.  Bank  v.  Owensboro,  173  U.  S.  664,  19  Sup.  Ct. 
537,  43  L.  Ed.  S50.  See  "Taxation,"  Dec.  Dig.  (Key  No.)  §  10;  Cent. 
Dig.  §§  23-26. 

247  Stapylton  v.  Thaggerd,  91  Fed.  93,  33  C.  C.  A.  353;  City  and 
County  of  San  Francisco  v.  Croeker-Woolworth  Nat.  Bank  (C.  C.) 
92  Fed.  273.  Its  personal  assets  and  property  in  the  hands  of  a 
receiver  are  exempt.  Rosenblatt  v.  Johnston,  104  U.  S.  462,  26  L. 
Ed.  832.  See  "Taxation,"  Dec.  Dig.  [Key  No.)  §  10;  Cent.  Dig.  §§ 
23-26. 

248  Stapylton  v.  Thaggerd,  91  Fed.  93,  33  C.  C.  A.  353.  See  "Tax- 
ation," Dec.  Dig.  {Key  No.)  §  10;   Cent.  Dig.  §§  23-26. 

249  Linton  v.  Childs,  105  Ga.  567,  32  S.  E.  017.  See  "Taxation," 
Dec.  Dig.  (Key  No.)  §  10;    Cent.  Dig.  §§  23-26. 


§    113)  TAXATION    BY    STATES  437 

of  the  shares  of  the  holders.^''"  Thus,  where  a  state  statute 
provided  that  national  banks  should  be  taxed,  "but  not  at  a 
greater  rate  than  other  moneyed  capital  in  the  han^lg  of  in- 
(Hviduals  in  the  state,"  and  state  banks  were  taxed  on  their 
capital,  but  not  on  their  shares,  it  was  held  that,  a  tax  on  the 
capital  not  being  equivalent  to  a  tax  on  the  shares  of  the 
holders,  the  statute  was  void.-''^ 

The  shares  are  subject  to  taxation  in  the  hands  of  the  in- 
dividual shareholders.^ ^2  But  the  act  does  not  prescribe  the 
manner  in  which  the  tax  shall  be  collected,  and  a  tax  will  not 
be  deemed  a  tax  on  capital  because  the  state  law  requires  the 
bank,  as  agent  of  the  shareholders,  to  pay  the  tax  on  the 
shares. "3  fhe  shares  in  the  hands  of  the  shareholders  are 
subject  to  taxation,  although  some  or  all  of  the  capital  is  in- 
vested in  national  securities  declared  to  be  exempt  from 
taxation  by  state  authority."^* 

^■"'0  Van  Allen  v.  Asses.sors,  :j  Wall.  573,  18  L.  Ed.  229;  New  York 
ex  rel.  Duer  v.  Commissioners  of  Taxes  and  Assessments,  4  Wall. 
244.  18  L.  Ed.  344 ;  First  Nat.  Bank  v.  Kentucky,  9  Wall.  353,  19  L. 
Ed.  701.  See  "Taxation,"  Dec.  Dig.  {Key  No.)  §  11;  Cent.  Dig.  §§ 
27-29. 

^51  Van  Allen  v.  A.ssessors,  3  Wall.  573,  18  L.  Ed.  229.  See  "Tax- 
ation." Dec.  Dig.  (Key  No.)  §  11;   Cent.  Dig.  §§  27-29. 

2r.2Tappan  v.  Merchants'  Nat.  Bank,  19  Wall.  490,  22  L.  Ed.  189; 
Van  Slyke  v.  Wisconsin,  1.54  U.  S.  581,  14  Sup.  Ct.  116S,  20  L.  Ed. 
240. 

Shares  owned  hy  another  national  Lank  are  not  exempt.  Nation- 
al Bank  of  Redemption  v.  Boston,  125  U.  S.  60,  8  Sup.  Ct.  772,  31 
L.  Ed.  689.  See  "Taxation;'  Dec.  Dig.  (Key  No.)  §  11;  Cent.  Dig 
§§  27-29. 

2  •'5  3  First  Nat.  Bank  v.  Kentucky,  9  Wall.  3.53.  19  L.  Ed.  701; 
First  Nat.  Bank  v.  Chehalis  County,  166  U.  S.  440,  17  Sup.  Ct.  629, 
41  L.  Ed.  1069 ;  ^Merchants'  &  Mfrs.'  Nat.  Bank  v.  Pennsylvania,  167 
U.  S.  461,  17  Sup.  Ct.  829.  42  L.  Ed.  2.36;  Covington  v.  First  Nat. 
Bank.  198  U.  S.  100,  25  Sup.  Ct.  562,  49  L.  Ed.  963;  Citizens'  Nat. 
Bank  v.  Commonwealth  of  Kentucky,  to  Use  of  Boyle  County.  217 
U.  S.  443,  30  Sup.  Ct.  532,  54  L.  Ed.  832.  See  "Taxation^  Dec' Dig. 
{Key  No.)  §  11;   Cent.  Dig.  §§  27-20. 

-^'*  Van  Allen  v.  Assessors,  3  Wall.  573,  18  L.  Ed.  229;    New  York 


438  NATIONAL  BANKS  (Ch.  12 

The  only  restrictions  imposed  on  the  states  in  the  taxation 
of  the  shares  are:  (1)  That  the  taxation  shall  not  be  at  a 
greater  rate  than  is  assessed  upon  other  moneyed  capital  in 
the  hands  of  individual  citizens ;  and  (2)  that  the  shares  owned 
by  nonresidents  shall  be  assessed  in  the  city  or  town  where  the 
bank  is  located.  Nonresidents,  therefore,  cannot  be  taxed 
elsewhere,  as  in  the  state  where  they  reside.-^^  Residents  may 
be  taxed  at  the  place  where  the  bank  is  located,  or  where 
they  reside.- ^"^ 
Discrimination  Between  Shares  and  Other  Moneyed  Capital 

Not  only  must  the  taxation  be  of  the  shares  of  the  holders, 
as  distinct  from  the  capital,  property,  and  franchise  of  the 
corporation,  but  it  must  not  be  at  a  greater  rate  than  is  as- 
sessed on  other  moneyed  capital  in  the  hands  of  individual 
citizens.  The  taxation  must  not  discriminate  against  national 
banks.2"  This  does  not  mean  that  the  states,  in  taxing  their 
own  corporations,  must  conform  to  the  system  of  taxing 
national  banks  upon  the  shares  in  the  hands  of  their  own- 
gj-g  2  5S     gy^  ^j^y  different  method  of  assessment  or  taxation. 

ex  rel.  Diier  v.  Commissioners  of  Taxes  and  Assessments.  4  Wall. 
244,  18  L.  Ed.  344;  First  Nat.  Bank  v.  Kentucky,  9  Wall.  3")3.  19 
L.  Ed.  701;  Cleveland  Trust  Co.  v.  Lander,  184  U.  S.  Ill,  22  Sup. 
Ct.  394,  4C  L.  Ed.  456 ;  Hager  v.  American  Nat.  Bank,  159  Fed.  396, 
86  C.  C.  A.  334.  See,  also.  Home  Sav.  Bank  v.  Des  Moines,  205  U  S. 
503,  27  Sup.  Ct.  571,  51  L.  Ed.  901.  See  "Taxation,"  Dec.  Dig.  (Key 
No.)  §  11;    Cent.  Dirj.  §§  21-29. 

255  De  Baun  v.  Smith,  55  N.  J.  Law,  110,  25  Atl.  277.-  See  "Tax- 
ation;' Dec.  Dig.  {Key  No.)  §§  280-282;    Cent.  Dig.  §§  Jt56-J,60. 

256Tappan  v.  Merchants'  Nat.  Bank,  19  Wall.  490,  22  L.  Ed,  189; 
Austin  V.  Board  of  Aldermen  of  City  of  Boston,  14  Allen  (Mass.)  359. 
See,  also,  Austin  v.  Boston,  7  W^all.  694,  19  L.  Ed.  224.  Cf.  Waite  y. 
Dowley,  94  U.  S.  527,  24  L.  Ed.  181.  See  "Taxation,"  Dec.  Dig.  {Keg 
No.)  §§  280-282;    Cent.  Dig.  §§  J,.56--'iG0. 

2  57  Covington  v.  First  Nat.  Bank,  198  U.  S.  100,  25  Sup.  Ct.  502, 
49  L.  Ed.  9(J3.  See  "Taxation,"  Dec.  Dig.  (Keg  No.)  §  12;  Cent.  Dig. 
§  30. 

25S  Davenport  Nat.  Bank  v.  Board  of  Equalization,  123  U.  S.  S3, 
S  Sup.  Ct.  73,  31  L.  Ed.  94;    Covington  v.  First  Nat.  Bank,  198  U. 


§    113)  TAXATION    r,Y    M'ATES  439 

the  usual  and  probable  effect  of  which  would  be  to  discriminate 
in  favor  of  state  banks,  or  other  moneyed  capital,  and  ai2:ainst 
national  banks,  is  void.""  And  qven  where  no  discrjiiiination 
seemingly  arises  on  the  face  of  the  statute,  if  it  appears  that  the 
system  in  its  execution  produces  material  discrimination  against 
national  banks,  the  statute  must  be  held  void.-*"'"  And  although 
the  statute  provides  for  equality,  the  systematic  and  intentional 
valuation  of  other  moneyed  capital  below  its  true  value,  while 
national  bank  shares  are  assessed  at  their  full  value,  is  a  viola- 
tion of  the  act.-°^  The  taxation  of  national  bank  shares,  with- 
out permitting  the  shareholder  to  deduct  from  their  assessed 
value  the  amount  of  his  bona  fide  indebtedness,  as  in  the  case 
of  other  moneyed  capital,  is  a  discrimination  within  the  prohi- 
bition.-''-   - 

Other  Moneyed  Co[>ifal 

The  purpose  of  the  restriction  that  the  taxation  shall  not  be 
at  a  greater  rate  than  is  assessed  on  other  moneyed  capital 
in  the  hands  of  individuals  is  to  prevent  discrimination  against 
national  banks,  and  "moneyed  capital"  is  construed  to  mean 

S.  100,  25  Slip.  Ct.  5G2,  49  L.  Ed.  0(53;  San  Francisco  Nat.  Bank  v. 
Dodge,  197  U.  S.  70,  2.5  Sup.  Ct.  3S4,  49  L.  Ed.  609.  Sec  ''Taxation:' 
Dec.  Difi.  {Key  No.)  §  12;   Cent.  Dig.  §  30. 

259  Boy er  v.  Boyer,  113  U.  S.  0S9.  5  Sup.  Ct.  700.  28  L.  Ed.  10S9; 
Davenport  Nat.  Bank  v.  Board  of  Equalization,  123  U.  S.  S3,  S  Sup. 
Ct.  73.  31  L.  Ed.  04 ;  San  Francisco  Nat.  Bank  v.  Dodge,  197  U.  S. 
70,  25  Sup.  Ct.  3S4.  49  L.  Ed.  609.  See  ''Taxation;'  Dec.  Dig.  (Ken 
No.)  §  12;    Cent.  Dig.  §  30. 

260  Davenport  Nat.  Bank  v.  Board  of  Equalization,  123  U.  S.  83, 
8  Sup.  Ct.,  73,  31  L.  Ed.  94.  See,  also,  Cunnnings  v.  Merchants'  Nat. 
Bank,  101  U.  S.  153,  25  L.  Ed.  903.  Sec  "Taxation,"  Dec.  Dig.  (Key 
No.)  §  12;   Cent.  Dig.  §  30. 

261  Pelton  V.  Commercial  Nat.  P>ank,  101  U.  S.  143,  25  L.  Ed.  901. 
See,  also,  Kew  York  ex  rel.  Williams  v.  Weaver,  100  U.  S.  539,  25 
L.  Ed.  705.  See  "Taxation,"  Dec.  Dig.  (Key  No.)  §  12;  Cent.  Dig. 
§  30. 

26  2  Evansville  Nat.  Bank  v.  Britton,  105  U.  S.  322,  20  L.  Ed. 
1053.  See,  also,  Albany  County  v.  Stanley,  105  U.  S.  305,  26  L.  Ed. 
1044;    Wbitbeck  v.  Mercantile  Nat.  Bank,  127  U.  S.  193.  8  Sup.  Cr. 


140  NATIONAL   BANKS  (Ch.  12 

capital  engaged  in  operations  of  banking,  capital  that  is  money, 
or  being  employed  as  a  source  of  profit  by  its  use  as  money. -"^^ 
Conversely,  moneyed  capital  "does  not  include  capital  which 
does  not  come  into  competition  with  the  business  of  national 
banks."  -''*  The  restriction  does  not  apply  to  capital  invested 
m  mining,  manufacturing,  or  transportation.-^^  An  exemp- 
tion of  the  stocks  and  bonds  of  insurance,  wharf,  and  gas  com- 
panies, or  other  noncompeting  capital  or  credits  is  not  an  un- 
lawful discrimination  against  national  banks,  whose  shares  are 
taxed.-''"  Where  trust  companies  are  not  banks  in  the  com- 
mercial sense,  and  do  not  perform  the  functions  of  banks  in 
carrying  on  the  exchanges  of  commerce,  a  franchise  tax  based 
upon  their  income,  at  least  when  it  does  not  appear  that  a 
less  rate  of  taxation  falls  on  this  form  of  capital  than  that  im- 
posed on  national  bank  shares,  does  not  show  discrimina- 
tion.^®^    Although  the  deposits  of  savings  banks  are  moneyed 

1121,  32  L.  Ed.  lis.  Cf.  First  Nat.  Bank  v.  Ayers,  160  U.  S.  660. 
16  Slip.  Ct.  412,  40  L.  E(L  573 ;  First  Nat.  Banlv  v.  Cliapman,  173  U. 
S.  205.  19  Sup.  Ct.  407,  43  L.  Ed.  669.  See  "Taxation;'  Dec.  Din. 
{Key  'No.)  §  12;   Cent.  Dig.  §  SO. 

263  Mercantile  Nat.  Banlv  v.  New  Yorlc,  121  U.  S.  138,  7  Sup.  Ct. 
826,  30  L.  Ed.  895.  See  ''Taxation,"  Dec.  Dig.  {Key  No.)  §  12;  Cent. 
Dig.  §  30. 

264  First  Nat.  Banli  v.  Chapman,  173  TJ.  S.  205,  19  Sup.  Ct.  407, 
43  L.  Ed.  669.  See,  also.  First  Nat.  Bank  v.  Clielialis  County,  166 
U.  S.  440,  17  Sup.  Ct.  629,  41  L.  Ed.  1069;  Commercial  Nat.  Bank 
V.  Chambers,  182  U.  S.  556,  21  Sup.  Ct.  863,  45  L.  Ed.  1227.  Sec 
'•Taxation,"  Dec.  Dig.  (Key  No.)  §  12;   Cent.  Dig.  §  30. 

265Talbott  V.  Silver  Bow  County,  139  U.  S.  438,  11  Sup.  Ct.  594, 
35  L.  Ed.  210.  See  "Taxation,"  Dec.  Dig.  {Key  No.)  §  12;  Cent.  Dig. 
§  30. 

266  First  Nat.  Bank  v.  Chehalis  County,  166  U.  S.  440,  17  Sup.  Ct. 
629,  41  L.  Ed.  1069.  See  "Taxation,"  Dec.  Dig.  {Key  No.)  §  12;  Cent. 
Dig.  §  30. 

267  Mercantile  Nat.  Bank  v.  New  York.  121  U.  S.  138,  7  Sup.  Ct. 
826,  30  L.  Ed.  895;  TS'ational  Bank  of  Bedeniption  v.  Boston,  125 
U.  S.  60,  8  Sup.  Ct.  772,  31  L.  Ed.  689;  Jenkins  v.  Neff,  186  U.  S. 
230,  22  Sup.  Ct.  905,  46  L.  Ed.  1140.  See  "Taxation,"  Dec.  Dig. 
(Key  No.)  §  12;    Cent.  Dig.  §  SO. 


s 


113)  TAXATION    BY    STATES  441 


capital  in  the  hands  of  indivichials,  they  are  not  within  the  re- 
striction in  such  sense  as  to  require  that,  if  they  are  exempted 
from  taxation,  shares  of  stock  in  national  banks  shatt^also  be 
exempted ;  it  being  the  policy  of  the  state  to  encourage  such 
institutions,  and  the  exemption  not  being  an  unfriendly  dis- 
crimination against  investments  in  national  bank  shares.-^* 

268  National  Bank  of  Redemption  v.  Boston,  125  U.  S.  60,  8  Sup.  Ct. 
772,  31  L.  Ed.  689;  Mercantile  Nat.  Bank  v.  New  York,  121  U.  S. 
138,  7  Sup.  Ct.  826,  30  L.  Ed.  89.5;  Davenport  Nat.  Bank  v.  Board 
of  Equalization,  123  U.  S.  83,  8  Sup.  Ct.  73,  31  L.  Ed.  94.  See,  also, 
First  Nat.  Bank  v.  Chapman,  173  U.  S.  205,  19  Sup.  Ct.  407,  43  L. 
Ed.  669.    See  •'Taxation,"  Dec.  Dig.  {Key  No.)  §  12;   Cent.  Dig.  §  30. 


442  SAVINGS  BANKS  (Ch.  13 

CHAPTER  XIII 
SAVINGS  BANKS 

114.  Nature   of   Savings   Banks. 

115.  Management  and  Officers. 

116.  Relation  Between  Bank  and  Depositor. 

117.  By-Laws — Contract  of  Deposit. 

lis.     Payment  oil  Production  of  Pass  Book. 

119.  Gift  of  a  Deposit— Deposit  in  Trust. 

120.  Deposit  in  Name  of  Anotlier. 

121.  Delivery  of  Pass  Book. 

122.  Joint  Deposit. 

NATURE  OF  SAVINGS  BANK 

114.  A  savings  bank,  in  the  stricter  sense,  is  a  corporation, 
without  capital  stock  and  stockholders,  created  for 
the  purpose  of  receiving  the  moneys  of  small  de- 
positors and  investing  them,  subject  to  the  re- 
strictions of  the  charter,  solely  for  the  benefit  of 
the  depositors,  repaying  to  them  the  amount  of 
their  deposits,  with  interest,  as  payment  may  be 
called  for  from  time  to  time.  In  some  states,  how- 
ever, savings  banks  may  be  incorporated  with  a 
capital  stock,  in  which  the  stockholders  receive  the 
profits  over  the  interest  reserved  to  the  depositors. 

In  General 

A  savings  bank,  using  the  term  in  its  stricter  sense,  is  an 
incorporated  agency  for  receiving  the  moneys  of  depositors 
m  small  or  moderate  amounts,  and  investing  them  merely  for 
the  use  and  benefit  of  the  depositors,  who  are  to  receive  the 
advantage  thereof  in  just  proportion.^     The  chief  pyrpose  is 

1  Lewis  v.  Lynn  Inst,  for  Savings,  148  Mass.  235,  19  N.  E.  3G5.  I 
L.  R.  A.  785,  12  Am.  St.  Rep.  .535.     See,  also,  Mitchell  v.  Beckman. 


§    114)  NATURE    OF    SAVINGS   BANK  443 

to  encourage  fruj^ality  by  affording  to  persons  of  small  means 
an  opportunity  to  have  their  savings  cared  for  by  persons  of 
experience,  who,  by  combining  the  deposits,  can  -make  ad- 
vantageous investments  not  available  for  small  investors.^  Usu- 
ally, therefore,  the  corporation  has  no  capital  stock,  and  no 
profit  or  benefit  accrues  to  the  managers,  beyond  their  salaries.' 
Sometimes,  however,  the  original  and  strict  type  of  savings 
banks  is  departed  from,  and  savings  banks  are  incorporated 
with  a  capital  stock,  in  which  the  stockholders  participate  in 
the  profits  over  the  interest  reserved  to  the  depositors,*  and 
other  incidents  of  corporations  organized  as  commercial  en- 
terprises, such  as  the  liability  of  the  stockholders  to  creditors, 

64  Cal.  117,  28  Pac.  110;  Hannon  v.  Williams,  34  N.  J.  Eq.  25o,  38 
Am.  Rep.  378;  Barrett'  v.  Bloomfield  Sav.  Inst.,  G4  N.  J.  Eq..425,  54 
Atl.  543 ;  People  v.  Bingliamtou  Trust  Co.,  139  N.  Y.  185.  34  N.  E. 
898. 

Whether  a  bank  is  a  savings  bank  depends,  not  on  its  designation, 
but  on  its  functions.     State  v.  Lincoln  Sav.  Bank,  82  Tenn.  42. 

Under  a  constitutional  provision  that  no  act  authorizing  corpora- 
tions or  associations  with  banking  powers  shall  take  effect  until 
submitted  to  the  people,  an  act  authorizing  savings  societies  is  in- 
cluded. Reed  v.  People  ex  rel.  Hmit,  125  111.  592,  18  N.  E.  295,  1 
L.  R.  A.  324.  See  ''Banks  and  Banking,"  Dec.  Dig.  (.Key  -Vo.)  §  2Sd ; 
Cent.  Dig.  §§  1128,  1130. 

2  See  Huntington  v.  Nat.  Sav.  Bank,  96  U.  S.  388,  24  L.  Ed.  777 ; 
Lewis  V.  Lynn  Inst,  for  Savings,  148  Mass.  235,  19  N.  E.  365,  1  L.  R. 
A.  785,  12  Am.  St.  Rep.  535.  See  ''Banks  and  Banking,"  Dec.  Dig. 
{Keg  yo.)  §  289;   Cent.  Dig.  §§  1128,  1130. 

3  Lewis  V.  Lynn  Inst.  for. Savings,  148  Mass.  235,  19  N.  E.  365,  1 
L.  R.  A.  785,  12  aVm.  St.  Rep.  535 ;  Dickson  v.  Kittson,  75  Minn.  168, 
77  N.  W.  820,  74  Am.  St.  Rep.  447.  See,  also,  Sheren  v.  Mendenhall, 
23  Minn.  92.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  Xo.)  §§  289, 
294;   Cent.  Dig.  §§  1128,  1139. 

4  See  Newton  v.  Eagle  &  Phenix  Mfg.  Co.  (C.  C.)  101  Fed.  149 ; 
Murphy  v.  Pacific  Bank,  119  Cal.  334,  51  Pac.  317;  Ackenhausen  v. 
People's  Sav.  Bank,  110  Mich.  175,  68  N.  W.  118,  33  L.  R.  A.  408, 
64  Am.  St.  Rep.  338.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  So.) 
?§  2-89,  293;    Cent.  Dig.  §§  1128,  1133-1135. 


444  SAVINGS   BANKS  (Ch-  13 

may  exist. '^    Recently  so-called  postal  savings  banks  have  been 
created  by  act  of  Congress.*^  ^ 

Under  the  normal  type  of  savings  bank,  the  relation  between 
the  bank  and  its  depositors  iS  one  of  trust,  defined  by  its  char- 
ter and  by-laws.^  The  depositors  are  not,  as,  such,  stockhold- 
ers or  members  of  the  corporation.^  The  moneys  deposited 
are  not  used  in  making  ordinary  loans  and  discounts,  as  in  the 
case  of  commercial  banks,  and  usually  the  law  of  incorporation 
carefully  defines  the  securities  in  which  the  trustees  may  in- 
vest, such  as  real  estate  mortgages,  bonds  of  the  United  States 
and  of  states  and  municipalities,  railroad  bonds,  and  the  like, 
and  also  provides  for  and  regulates  the  management  of  the 
bank  to  the  end  that  the  savings  of  the  depositors  may  be 
safely  invested  and  secured.  A  discussion  of  the  questions 
presented  under  these  statutory  provisions  will  not  be  attempt- 
ed. The  principal  questions  to  be  considered  are  those  that 
arise  from  the  relation  between  the  depositors  and  the  bank. 

Pozvers  of  Bank — Ultra  Vires 

As  with  other  incorporated  banks,  the  powers  of  a  savings 
bank  are,  of  course,  to  be  determined  by  its  charter  or  the 
act  under  which  it  is  incorporated.^  Like  other  corporations 
created  for  business  purposes,  unless  expressly  restrained,  sav- 
ings banks  have  implied  power  to  incur  debts  in  the  course  of 

5  See  Queenan  v.  Palmer,  117  111.  02,  G19,  7  N.  E.  470,  613 ;  Herrou 
V.  Vance,  17  Ind.  59.5;  Franklin  Sav.  Bank  v.  Fatzinger  (Pa.)  4  Atl. 
912;  In  re  Gibbs,  157  Pa.  59,  27  Atl.  383,  22  L.  R.  A.  276.  See 
''Banks  and  Banking,"  Dec.  Difj.  {Keij  No.)  §  293;  Cent.  Dig.  §§  1133- 

,1135. 

6  Act  June  25,  1910,  c.  380,  36  Stat.  814. 

7  See  Dickson  v.  Kittson,  75  Minn.  168,  77  N.  W.  820,  74  Am.  St. 
Rep.  447;  Dodd  v.  Una,  40  N.  J.  Eq.  672,  5  Atl.  155;  Barrett  v. 
Bloomfield  Sav.  Inst.,  64  N.  J.  Eq.  425,  54  Atl.  543,  affirmfid  66  N.  J. 
Eq.  431,  57  Atl.  1131.  See  ''Banks  and  Bunking,"  Dec.  Dig.  (Key  No.) 
§§  293,  291t;   Cent.  Dig.  §§  1133-1149. 

8  Savings  Bank  of  New  London  v.  Town  of  New  London,  20  Conn. 
111.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  293;  Cent.  Dig. 
§§  1133-1133. 

8  Ante,  p.  275. 


§   114)  NATURE   OF   SAVINGS   BANK  44;") 

their  legitimate  business,  and  to  make  negotiable  paper  in 
payment  of  such  debts  and  to  pledge  their  securities  as  a  means 
of  borrowing.^** 

Where  a  contract  beyond  the  powers  of  the  bank  nas  been 
made,  it  cannot  be  enforced  by  either  party,  so  long  as  it  is 
executory.^ ^  Nor  can  it  be  enforced  if  it  is  against  public 
policy  or  immoral.^"  But  otherwise,  if  the  contract  has  been 
executed,  the  defense  of  ultra  vires,  according  to  the  prevail- 
ing rule,  is  not  open  to  the  bank,^''  nor  to  the  other  party  in 
an  action  by  the  bank.^'*  So  statutes  prohibiting  certain  trans- 
actions for  the  protection  of  the  depositors  are  not  available 
in  defense  in  an  action  by  the  bank,  where  contracts  have  been 
entered  into  not  in  conformity  therewith. ^^     A  law  making  it 

10  See  Sistare  v.  Root.  88  N.  Y.  527,  affirming  24  Hun,  .384;  Fifth 
Ward  Sav.  Bank  v.  First  Nat.  Bank,  48  N.  J.  Law,  513.  7  Atl.  318; 
Hieronimus  v.  Sweeney,  83  Md.  146,  34  Atl.  823,  33  L.  R.  A.  99, 
55  Am.  St.  Rep.  333.  See  "Banks  and  Banking,''  Dec.  Dig.  (Ken 
l<o.)  §§  295,  302;   Cent.  Dig.  §§  1150-1153,  1189-1191. 

1 1  Jemison  v.  Citizens'  Sav.  Bank  of  Jefferson,  122  N.  Y.  135.  25 
N.  .E.  264,  9  L.  R.  A.  708,  19  Am.  St.  Rep.  482.  See  "Banks  and 
Banking,"  Dec.  Dig.  {Key  No.)  §  295;  Cent.  Dig.  §§  1150-1153. 

1 2  Jemison  v.  Citizens'  Sav.  Bank  of  Jefferson,  122  N.  Y.  135,  25 
N.  E.  264,  9  L.  R.  A.  708,  19  Am.  St.  Rep.  482.  See  ''Bunks  and  Bank- 
ing," Dec.  Dig.  {Key  No.)  §  295;   Cent.  Dig.  §§  1150-1153. 

i3Laidlaw  v.  Bank  (Cal.)  67  Pae.  897;  Cogswell  v.  Rockingham 
Ten  Cents  Sav.  Bank.  59  N.  H.  53.  See  ''Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  295;   Cent.  Dig.  §§  1150-1158. 

14  United  German  Bank  of  Baltimore  City  v.  Katz,  57  Md.  128; 
Hieronimus  v.  Sweeney,  S3  Md.  146,  34  Atl.  823,  33  L.  R.  A.  99,  55 
Am.  St.  Rep.  333;  Hurd  v.  Green,  17  Hun  (N.  Y.)  327,  affirmed  78 
X.  Y.  588.  34  Am.  Rep.  567.  See,  also,  Pratt  v.  Short,  79  N.  Y.  437, 
35  Am.  Rep.  531.  See  "Banks  and  Banking,"  Dep.  Dig.  {Key  No.)  § 
295;   Cent.  Dig.  §§  1150-1153. 

isBrittan  v.  Oakland  Bank  of  Savings.  124  Cal.  282,  57  Pac.  84. 
71  Am.  St.  Rep.  58;  Farmington  Sav.  Bank  v.  Fall,  71  Me.  49;  Au- 
burn Sav.  Bank  v.  Brinkerhoff,  44  Hun  (N.  Y.)  142. 

Code  Iowa,  §  1855,  prohibiting  savings  banks  from  contracting  any 
debt  except  for  deposits  and  expenses,  etc.,  was,  for  the  benefit  of 
depositors,  creditors,  etc.,  aud,  when  such  a  bank  becomes  insolvent, 
creditors,  whose  loans   were  prohibited  thereby,   should  not  be  al- 


446  SAVINGS   BANKS  (Ch.  13 

unlawful  for  a  bank  to  receive  from  any  person  a  deposit  in 
excess  of  a  certain  amount  does  not  prevent  a  recovery  of 
the  excess.^® 


MANAGEMENT  AND  OFFICERS 

115.  Savings  banks  of  the  normal  type  are  managed  by  a 
board  of  trustees,  who  are  named  in  the  charter, 
who  fill  vacancies  in  the  board,  and  who  appoint 
the  executive  officers. 

Savings  banks  of  the  normal  type  are  managed  by  a  board 
of  trustees,  or  directors,  or  managers,  who  are  named  in  the 
charter  or  certificate  of  incorporation,  who  themselves  fill  va- 
cancies in  the  board  and  who  appoint  the  treasurer  and  other 
executive  officers.  ^^ 

The  powers  of  the  various  officers  must  be  sought  in  the 
charter  and  by-laws.  The  treasurer  is  an  officer  who  has,  by 
virtue  of  his  office,  much  more  limited  powers  than  the  cashier 
of  a  commercial  bank,  and  his  duties,  it  has  been  said,  more 
nearly  resemble  those  of  the  paying  and  receiving  tellers  of 
such  banks.^^  Greater  authority  may,  of  course,  be  conferred 
upon  him  by  the  board  of  trustees,  expressly  or  impliedly.^* 

lowed  to  share  with  lawful  creditors.  State  v.  Corning  State  Sav. 
Bank,  136  Iowa,  79,  113  N.  W.  .500.  See,  also,  Laidlaw  v.  Pacific 
Bank,  137  Cal.  392,  70  Pac.  277.  See  ''Banks  and  Banlcin(j,"  Dec. 
Dig.  {Key  No.)  §  295;    Cent.  Dig.  §§  1150-1153. 

16  Taylor  v.  Empire  State  Sav.  Bank,  66  Hun,  5-38,  21  N.  Y.  Supp. 
643.  See  "Banks  and  Banking,''  Dec.  Dig.  {Key  No.)  §  305;  Cent. 
Dig.  §  111/9. 

17  See  Williams  v.  McKay,  46  N.  J.  Eq.  25,  18  Atl.  824.  See  "Banks 
and  Banking,"  Dec.  Dig.  {Key  No.)  §  29-i;   Cent.  Dig.  §§  1136-1149. 

1 8  Fifth  Ward  Sav.  Bank  v.  First  Nat.  Bank,  47  N.  J.  Law,  3.j7. 
7  Atl.  318.     See,  also,  Bradlee  v.  Warren  Five  Cents  Sav.  Bank,  127 

19  North  Brookfield  Sav.  Bank  v.  Flanders,  161  Mass.  33.5,  37  N. 
E.  307.  >Sree  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  297;  Cent. 
Dig.  §  1155. 


§    115)  MANAGEMKNT   AND   OFFICERS  447 

The  trustees  occupy  a  fiduciary  relation  to  the  depositors.-" 
It  is  their  duty  to  exercise  in  the  discharge  of  their  trust  the 
same  good  faith  and  substantially  the  same  degree  of  diligence 
and  care  that  is  demanded  of  the  directors  of  otheT  banks.-' 
They  should  exercise  the  care  and  diligence  which  a  reason- 
ably prudent  business  man  would  exercise  in  similar  business 
of  his  own. -2  For  losses  which  result  from  their  dishonesty, 
disregard  of  charter  requirements  or  culpable  negligence  they 
are  personally  liable.^^  The  liability  of  the  other  ofiicers  is 
similar.-*  In  addition  to  their  common-law  liability,  the  trus- 
tees are  often  made  liable  for  certain  derelictions  of  duty  by 
statute.^^  An  action  to  enforce  the  liability  of  the  officers  may 
be  brought  by  the  bank  or  by  its  receiver.^"  And  it  may  be 
brought 'by  the  depositors  upon  refusal  of  the  bank  to  bring 
suit ;   the  bank,  or  the  receiver,  if  one  has  been  appointed,  be- 

Mass.  107,  34  Am.  Rep.  351 ;  Com.  v.  Readins  Sav.  Bauk,  133  Mass. 
16.  43  Am.  Rep.  495;  Holden  v.  Upton,  134  Mass.  177;  Holden  v. 
Phelps,  135  Mas.s.  61;  Slattery  v.  North  End  Sav.  Bank,  175  Mass. 
380.  56  N.  E.  606.  Cf.  Bangor  Sav.  Bank  v.  Wallace,  87  Me.  28.  32 
Atl.  716.  See  '"Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §  297; 
Cent.  Dig.  §  1155. 

-0  See  eases  cited  ante,  note  7. 

21  Ante,  p.  296. 

22  Williams  v.   McKay,  40  N.  J.  Eq.  189,  53  Am.  Rep.  775;    Id., 
46  X.  J.  Eq.  25,  18  Atl.  824.     .S'ee  "Banks  and  Banking,"  Dec.  Dig.' 
{Key  A'o.)  §§  29',,  207;    Cent.  Dig.  §§  lL'a-ll'i9,  115.',-1156. 

23  Thompson  v.  Greeley,  107  Mo.  577,  17  S.  W.  962;  Williams  v. 
McDonald.  42  N.  J.  Eq.  392,  7  Atl.  866 ;  Ilun  v.  Gary,  82  N.  Y.  65, 
37  Am.  Rep.  546.  See,,  also,  Dunn's  Adm'r  v.  Kyle's  Ex'r,  14  Bush 
(Ky.)  134.  Sec  "Banks  and  Banking,"  Dec.  Dig.  {Key  No,)  §  25./; 
Cent.  Dig.  §§  11J,1-11J,9. 

24  Williams  v.  Riley,  34  N.  J.  Eq.  398;  Williams  v.  McKay,  46  X. 
J.  Eq.  25,  18  Atl.  824.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  29.',;   Cent.  Dig.  §§  llJfl-11',9. 

25  See  Ryan  v.  Ray,  105  Ind.  101,  4  N.  E.  214;  Van  Dyck  v.  Mc- 
Quade,  86  N.  Y.  38.  See  "Banks  and  Banking,"  Dee.  Dig.  {Key  No.) 
§  29 J,;  Cent.  Dig.  §§  lUl-ll-'i9. 

26Dodd  V.  Wilkinson,  41  X.  J.  Eq.  566,  7  Atl.  337.  See  "Batiks 
and  Banking,"  Dec.  Dig.  {Key  Nch^  §  29-i;   Cent.  Dig.  §  II49. 


448  SAVINGS  BANKS  (Ch.  13 

ing  a  necessary  party.^^    In  some  cases  the  procedure  is  gov- 
erned bv  statute."^ 


RELATION  BETWEEN  BANK  AND  DEPOSITOR 

116.  The  relation  between  the  bank  and  the  depositor  is  in 
effect  that  of  debtor  and  creditor;  but,  while  the 
depositor  is  entitled  to  be  repaid  in  full  if  the  as- 
sets are  sufficient,  in  case  of  a  deficiency  all  must 
share  alike  in  the  losses  as  well  as  in  the  profits. 
Upon  insolvency  the  debts  of  the  bank  are  to  be 
first  paid,  and  a  depositor  cannot  set  off  the  amount 
of  his  deposit  against  his  debt  to  the  bank. 

In  General 

The .  relation  between  the  bank  and  the  depositor  neces- 
sarily contemplates  that  the  money  of  the  depositors  shall  be 
mingled,  and  that  out  of  the  general  fund  the  investments  shall 
be  made  and  the  expenses  of  administration  shall  be  paid. 
It  follows  that  the  bank  has  title  to  the  moneys  deposited  as 
well  as  to  the  securities  in  which  they  are  invested. ^^  It  is 
often  said,  therefore,  that  the  relation  between  the  bank  and 
the  depositor  is  that  of  debtor  and  creditor.^*'     Nevertheless 

2  7  Chester  v.  Ililliard,  34  N.  J.  Eq.  341.  See,  also,  Winchester 
V.  Howard,  136  Cal.  432,  G4  Pac.  692,  69  Pac.  77,  89  Am.  St.  Rep. 
153;  Mccolls  v.  Rice,  147  Cal.  633,  82  Pac.  321;  Maisch  v.  Saving 
Fund,  5  Phila.  (Pa.)  30;  Leffman  v.  Flanigan,  5  Phila.  (Pa.)  155. 
See  '-Banks  and  Banking;'  Dec.  Dig.  {Key  No.)  §  29^;  Cent.  Dig.  § 
11J,9. 

2  8  Ryan  V.  Ray,  105  Ind.  101,  4  N.  E.  214.  See  "Banks  and  Bank- 
ing;' Dec.  Dig.  (Key  No.)  §  294;   Cent.  Dig.  §  II48. 

2  9  Ward  V,  Johnson,  5  111.  App.  30;  Zinn  v.  ^Nlendel,  9  W.  Va.  580. 
See  "Banks  and  Banking;'  Dec.  Dig.  (Key  No.)  §§  129-131,  301;  Cent. 
Dig.  §§  312-338,  llGS-1176. 

30  Ladd  V.  Androscoggin  County  Sav.  P,ank,  96  Me.  520,  52  Atl. 
1016;  Reed  v.  Home  Sav.  Bank,  130  Mass.  443,  39  Am.  Rep.  468; 
Schippers  v.  Kempkes  (N.  J.)  67  Atl.  1042.  ,  See,  also,  Robinson  v.' 


§    116)  RELATION  BETWKEN  BANK  AND  DEPOSITOR  441) 

it  must  be  rcnienibered  that,  while  the  bank  may  combine  the 
tleposits,  it  is  a  mere  agency  for  investing,'  the  money  of  the 
depositors,  and  that,  while  a  depositor  is  entitled  to  be  re- 
paid in  full  if  the  assets  are  sufiicient,  one  depositof*can  have 
no  greater  rights  than  any  other,  and  in  case  of  a  deficiency 
all  must  share  alike  in  the  losses  as  well  as  in  the  profits,  and 
consequently  there  can  be  no  promise  to  pay  in  full  at  all 
events.^ ^  "The  corporation  is  a  mere  agency  for  managing 
the  moneys  of  the  depositors.  To  others — to  third  persons — 
the  corporation  can  incur  liabilities,  in  contract  or  in  tort,  for 
which  the  funds  in  its  hands  will  be  responsible.  But  to  the 
depositors  themselves  the  undertaking  of  the  corporation  is 
that  it  will  receive  and  combine  the  deposits,  and  manage  and 
use  them  to  the  best  practicable  advantage,  according  to  the 
■judgment  of  the  trustees,  and  give  to  the  depositors  in  just 
proportion  among  themselves  the  benefit  of  the  result  of  such 
management.  There  is  no  absolute  promise  to  repay  to  any 
depositor  the  full  amount  of  his  deposit  at  all  events.  Such 
a  promise  to  one  depositor  would  imply  that,  in  case  of  loss, 
he  should  be  repaid  out  of  the  deposits  of  others.  But  the 
promise  or  undertaking  of  the  corporation  is  the  same  to  all. 
There  is  no  promise  to  pay  one  at  the  expense  of  others. 
The  promise  is,  in  effect,  to  pay  each  depositor  in  full,  with 
his  dividends,  provided  the  assets  are  sufficient,  and,  if  they 
are  not  sufficient,  then  to  pay  to  each  one  his  proportionate 
share."  ^^     It  follows  that  if  the  bank  had  suffered  losses,  so 

Aird,  43  Fla.  30,  29  South.  633.    See  ''Banlcs  and  Banlcing,"  Dec.  Dig. 
{Key  -To.)  §§  119,  289 j   Cent.  Dig.  §§  2S9-292,  1128. 

31  Lewis  V,  Lynn  Inst,  for  Savings,  148  Mass.  23.3,  10  N.  E.  3Go, 
1  L.  R.  A.  785,  12  Am.  St.  Rep.  535.  See,  also,  Bunnell  v.  Collinsville 
Savings  Soc,  38  Conn.  203,  9  Am.  Rep.  380 ;  Abbott  v.  Wolfeborough 
Sav.  Bank,  G8  N.  H.  290,  38  Atl.  1050;  Mann  v.  Carter,  74  N.  H. 
345,  08  Atl.  130,  15  L.  R.  A.  (N.  S.)  150.  See  "Banks  and  Banking^ 
Dec.  Diij.  (Key  .Yo.)  §§  133,  305;    Cent.  Dig.  §§  339-352,  1177-1182. 

3  2  Lewis  V.  Lynn  Inst,  for  Savings,  148  Mass.  235,  19  N.  E.  3G5,  1 
L.  R.  A.  7S."..  12  Am.  St.  Rep.  535.     See  "Banks  and  Banking,"  Dec. 
Dig.  (Key  .To.)  §§  133,  305;   Cent.  Dig.  §§  339-352,  1177-1182. 
TiFF.r.KS.&  B.— 29 


450  SAVINGS   BANKS  (Ch.  13 

that  the  funds  were  insufficient  to  pay  in  full,  this  would  be 
a  defense  in  a  suit  by  a  depositor  against  the  bank.^^ 

Insolvency 

In  insolvency  proceedings  the  expenses  of  the  administra- 
tion and  the  debts  of  the  bank  are  to  be  first  paid  in  full,  and 
the  assets  remaining  are  to  be  divided  among  the  general  de- 
positors.^* 

Owing  to  the  peculiar  relation  between  the  depositor  and  the 
bank,  a  depositor  who  is  also  a  debtor  to  the  bank  cannot,  on 
its  insolvency,  unless  it  is  otherwise  provided  by  statute,^ ^  set 
off  the  amount  of  his  deposit  against  his  indebtedness;  his 
debt  to  the  bank  belonging  in  fact  to  all  the  depositors,  so 
that  the  demands  are  not  mutual.^* 

BY-LAWS— CONTRACT  OF  DEPOSIT 

117.  The  rights  of  the  depositors  in  respect  to  payment  are 
usually  regulated  by  the  by-laws,  which  are  a  part 
of  the  contract  between  the  bank  and  the  depositor. 

3  3  Lewis  V.  Lynn  Inst,  for  Savings,  148  Mass.  235,  19  N.  E.  365, 
1  L.  R.  A.  785,  12  Am.  St.  Rep.  535.  See  "Banks  and  Banling,"  Dec. 
Dig.  (Key  No.)  §§  133,  305;    Cent.  Dig.    §§  339-352,  1171-1182. 

34  Cogswell  V.  Rockingham  Ten  Cents  Sav.  Bank.  59  N.  H.  43; 
Stockton  V.  Mechanics'  &  Laborers'  Sav.  Bank,  32  N.  J.  Eq.  163.  See, 
also,  Kennedy  v.  New  Orleans  Sav.  Inst,  36  La.  Ann.  1;  Lewis  v. 
Lynn  Inst,  for  Savings,  148  Mass.  235,  19  N.  E.  365,  1  L.  R.  A.  785, 
12  Am.  St.  Rep.  535.  But  see  People  v.  Mechanics'  &  Traders'  Sav. 
Inst.,  92  N.  Y.  7.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.)  §§ 
80,  81,  135,  309;   Cent.  Dig.  §§  1S4-197,  375-379,  1201-1214. 

3  5  See  North  Bridgewater  Sav.  Bank  v.  Soule,  129  Mass.  528.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §§  80,  81,  135,  309;  Cent. 
Dig.  §§  184-197,  375-379,  1201-1214. 

3  6  Osborn  v.  Byrne,  43  Conn.  155,  21  Am.  Rep.  641;  Hannon  v. 
Williams,  34  N.  J.  Eq.  255,  38  Am.  Rep.  378 :  Cogswell  v.  Rockingham 
Ten  Cents  Sav.  Bank,  59  N.  H.  43.  See,  also,  Van  Dyck  v.  McQuade. 
20  Hun  (N.  Y.)  202,  affirmed  85  N.  Y.  616.  See  "Banks  and  Banking," 
Dec.  Dig.  (Key  No.)  §§  SO,  135,  309;  Cent.  Dig.  §§  184-196,  375-379, 
1201-1214. 


§    118)  PAYMENT  ON  PRODUCTION  OF  PA«S  BOOK  451 

The  duties  and  rights  of  the  bank  and  of  the  depositors 
in  respect  to  making  and  receiving  payment  are  usually  regu- 
lated by  the  by-laws.  The  depositors  are  often  re3[uired  ,to 
subscribe  to  the  rules  and  regulations,  and  they  thereby  be- 
come a  part  of  the  contract  of  deposit.  They  are  also  usually 
printed  in  the  pass  book,  so  that  by  accepting  the  book  the 
depositor  agrees  to  be  bound  thereby."  The  contract  is  also 
binding  upon  the  bank,  which  cannot  alter  its  contract  with  a 
depositor  by  a  change  in  the  by-laws  to  which  he  has  not  as- 
sented. If  the  depositor  has  not  notice  of  a  change,  deposits 
afterwards  made  by  him  must  be  taken  to  have  been  made 
under  the  original  contract. ^^ 


PAYMENT  ON  PRODUCTION  OF  PASS  BOOK 

118.  The  by-laws  usually  provide  that  payment  shall  be 
,  made  to  the  depositor  only  upon  production  of  his 
pass  book.  Generally  a  payment  by  the  bank,  in 
good  faith  and  in  the  exercise  of  ordinary  care,  to 
one  who  produces  the  book  as  his  own,  is  binding 
on  the  depositor. 

37Ladd  V.  Audroscoggin  County  Sav.  Bank,  90  Me.  520,  52  Atl. 
1016;  Heath  v.  Portsmouth  Sav.  Bank,  40  N.  H.  78,  SS  Am.  Dec. 
194;  Cosgrove  v.  Provident  Inst,  for  Savings,  64  N.  J.  Law,  65.3,  46 
Atl.  617;  Warhus  v.  Bowery  Sav.  Bank,  5  Duer  (N.  Y.)  67,  affirmed 
21  N.  Y.  543 ;  Burrill  v.  Dollar  Sav.  Bank,  92  Pa.  134,  37  Am.  Rep. 
669;  'Gifford  v.  Rutland  Sav.  Bank,  63  Vt.  108,  21  Atl.  340,  11  L.  R. 
A.  794,  25  Am.  St.  Rep.  744. 

Otherwise  where  the  depositor  could  not  read  English  and  the 
rule  was  not  called  to  his  attention.  Siegel  v.  State  Bank  (App.  Div.) 
123  N.  Y.  Supp.  220.  But  see  Burrell  v.  Dollar  Sav.  Bank.  92  Pa.  134, 
37  Am.  Rep.  669  (holding  it  immaterial  that  the  depositor  could  not 
read).  See  "Banks  and  Banlcing,'"  Dec.  Dig.  {Key  :So.)  §  300;  Cent. 
Dig.  §§  1159-1161. 

3  8Kiuiins  V.  Boston  Five  Cent  Sav.  Bank,  141  Mass.  33,  6  N.  E. 
242,  55  Am.  Rep.  441 ;  Hudson  v.  Roxbury  Inst,  for  Savings,  176 
Mass.  522,  57  N.  E.  1021.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key 
No.)  §  300;   Cent.  Dig.  §§  11.59-1161. 


452  SAVINGS  BANKS  (Ch.  13 

The  by-laws  usually  provide  in  effect  that  payments  shall 
be  made  only  upon  production  of  the  depositor's  pass  book, 
in  which  all  deposits  ^nd  withdrawals  are  entered,  and  that 
presentment  of  the  pass  book  shall  be  sufficient  authority  to 
the  bank  to  make  any  payment  to  the  bearer.  Payments, 
when  the  depositor  cannot  present  his  book  in  person,  are 
generally  to  be  made  upon  the  written  order  of  the  depositor, 
accompanied  by  the  pass  book.  In  case  of  loss  of  the  book, 
payments  are  usually  to  be  made  upon  satisfactory  proof  of 
loss  and  indemnity.^® 

The  by-laws  of  different  banks,  of  course,  differ,  and  the 
mutual  rights  and  duties  of  the  depositor  and  the  bank  in 
respect  to  payments  will  depend  upon  the  particular  by- 
laws in  force.  A  few  examples  of  the  construction  placed  by 
the  courts  upon  such  by-laws  will  be  given  for  the  sake  of 
illustration. 

Where  the  by-law  provides  that  all  payments  to  persons 
producing  the  pass  book  shall  be  deemed  valid,  a  payment  to 
one  who  has  stolen  the  book  and  who  falsely  impersonates 
the  depositor  will  be  binding  on  the  depositor.*"  But  the  rules 
prescribed  by  the  bank  for  its  protection  in  the  payment  of 
deposits  do  not  dispense  with  the  exercise  of  ordinary  care 
upon  its  part,  and  payment  to  a  person  producing  the  book, 

3  9  See  Wall  v.  Provident  Inst,  for  Savings,  3  Allen  (Mass.)  9G ; 
Id.,  6  Allen  (Mass.)  320;  Heath  v.  Portsmouth  Sav.  Bank,  46  N.  H. 
78,  88  Am.  Dec.  194.  Cf.  Palmer  v.  Providence  Inst,  for  Sav.,  14 
R.  I.  68,  51  Am.  Rep.  341.  See  "Banks  and  Banking,"  Dec.  Dig.  (Key 
No.)  §  301;    Cent.  Dig.  §§  1102-1116. 

4  0  Goldrick  v.  Bristol  County  Sav.  Bank,  123  Mass.  320;  Donlan  v. 
Provident  Inst,  for  Savings,  127  Mass.  183,  34  Am.  Rep.  358;  Sul-^ 
livan  V.  Lewiston  Inst,  for  Savings,  56  Me.  507,  96  Am.  Dec.  500; 
Cosgrove  v.  Provident  Inst,  for  Savings,  64  N.  J.  Law,  653,  46  Atl. 
618.  Cf.  Ackenhausen  v.  People's  Sav.  Bank,  110  Mich.  175,  68  X. 
W.  118,  33  L.  R.  A.  408,  64  Am.  St.  Rep.  338.  But  see  Smith  v. 
Brooklyn  Sav.  Bank,  101  N.  y.  58,-  4  N.  E.  123,  54  Am.  Rep.  653. 
See  ''Banks  and  Banking,"  Dec.  Dig.  (Key  No.)  §  301;  Cent.  Dig.  §§ 
llC2-in6. 


§    118)  PAYMENT  ON  PRODUCTION  OF  PASS  BOOK  45;i 

which  lie  has  stolen,  will  not  discharge  the  bank  if  it  has  been 
negligent/^  And  under  a  by-law  providing  that,  as  the  bank 
may  not  be  able  to  identify  every  depositor,  it  wilLnot  be 
responsible  for  loss  where  the  depositor  has  not  given  notice 
that  his  book  has  been  lost  or  stolen,  if  the  deposit  shall  have 
been  paid  in  whole  or  in  part  on  presentation  of  the  book,  it 
has  been  held  that,  while  payment  to  one  fraudulently  imper- 
sonating the  depositor  in  presenting  the  book  is  authorized, 
the  by-law  is  no  protection  to  the  bank  if  it  pays  to  one  pre- 
senting the  book  with  a  forged  order  purporting  to  be  made 
by  the  depositor,  and  that  in  such  case  the  bank  is  bound  at 
its  peril  to  ascertain  the  genuineness  of  the  authority  pre- 
sented/^ If,  to  protect  the  bank  against  such  forgeries,  a 
by-law^  provides  that  the  bank  shall  not  be  responsible  to  the 
depositor  for  frauds  practiced  upon  it,  it  still  owes  to  the 
depositor  the  duty  to  exercise  ordinary  care.*^ 

4iLadd  V.  An(lroscoc:gin  Sav.  Bank.  96  Me.  510,  52  Atl.  lOlfJ ; 
Brown  v.  Merrimack  River  Sav.  Bank,  67  N.  H.  549.  39  Atl.  336,  68 
Am.  St.  Rep.  700 ;  Appleby  v.  Erie  County  Sav.  Bank,  62  N.  Y.  12 ; 
Kummel  v.  Germania  Sav.  Bank,  127  N.  Y.  488,  28  N.  E.  398,  13  L. 
R.  A.  786 ;  Gearns  v.  Bowery  Sav.  Bank,  135  N.  Y.  557,  32  N.  E.  249 ; 
Gifford  V.  Rutland  Sav.  Bank,  63  Vt.  108,  21  Atl.  340,  11  L.  R.  A. 
794,  25  Am.  St.  Rep.  744;  Wegner  v.  Second  Ward  Sav.  Bank,  76 
Wis.  242,  44  N.  W.  1096.  See  "Banks  and  Banking,"  Dec.  Dig.  (Keg 
\o.)  §  301;    Cent.  Dig.  §§  1162-1116. 

42Ladd  V.  Androscoggin  Sav.  Bank,  96  Me.  520,  52  Atl.  1016; 
Jochumsou  V.  Suffolk  Sav.  Bank,  3  Allen  (Mass.)  87 ;  Kimins  v.  Bos- 
ton Five  Cents  Sav.  Bank,  141  INIass.  33,  6  N.  E.  242,  55  Am.  Rep. 
441 ;  Kingsley  v.  Whitman  Sav.  Bank,  182  Mass.  252.  65  \.  E.  161, 
94  Am.  St.  Rep.  650.  See,  also,  Hough  Ave.  Savings  &  Banking  Co. 
V.  Andersson,  78  Ohio  St.  341,  85  N.  E.  498,  18  L.  R.  A.  (N.  S.)  431, 
125  Am.  St.  Rep.  707.  Cf.  Campbell  v.  Schenectady  Sav.  Bank,  114 
App.  Div.  337,  99  N.  Y.  Supp.  927;  Winter  v.  Williamsburgh  Sav. 
Bank,  68  App.  Div.  193,  74  N.  Y.  Supp.  140.  But  see  I.,angdale  v. 
Citizens'  Bank  of  Savannah,  121  Ga.  105,  48  S.  E.  70S,  60  L.  R.  A. 
341,  104  Am.  St.  Rep.  94.  See  "Banks  and  Banking,'"  Dec.  Dig.  (Keg 
No.)  §  301;   Cent.  Dig.  §§  1162-1176. 

4  3  Chase  v.  Waterbury  Sav.  Bank,  77  Conn.  295,  59  Atl.  37,  60  L. 
R.  A.  329 ;    Kummel  v.  Germania  Sav.  Bank,  127  N.  Y.  488,  28  N.  E. 


454  SAVINGS  BANKS  (Ch.  13 

The  by-laws  usually  provide  that  on  the  death  of  the  de- 
positor the  deposit  shall  be  paid  to  his  legal  representatives.** 
Under  such  a  rule  it  has  been  held  that  the  bank  is  bound  to 
see  that  payment  is  made  to  the  duly  appointed  legal  repre- 
sentative, and  that  payment  to  any  other  person,  the  bank 
having  knowledge  of  the  depositor's  death,  is  at  the  peril  of 
the  bank;  the  by-law  being  made  for  the  protection  of  the 
depositor  when  he  can  no  longer  protect  himself.*'^  But  it  has 
been  held  that,  if  the  death  be  unknown  to  the  bank,  it  is 
liable  only  if  it  fails  to  use  ordinary  care,  where  the  by-laws 
also  provide  that  payments  to  persons  producing  the  books 
shall  be  valid.*« 

GIFT  OF  A  DEPOSIT 

119.  DEPOSIT  IN  TRUST — Where  one  person  makes  a 
deposit  of  his  own  money  "as  trustee"  for  another, 
a  trust  is  thereby  created  if  the  depositor  so  in- 
tends; but  some  courts  hold  that  communication 
to  and  acceptance  by  the  beneficiary  is  essential, 
while  other  courts  hold  that  such  a  deposit  creates 

398,  13  L.  R.  A.  786.  See,  also.  Levy  v.  Frauklin  Sav.  Bank,  117 
Mass.  448. 

Where  a  savings  bank  failed  to  make  a  physical  comparison  of 
a  purported  signature  to  a  draft  with  the  signature  of  the  depositor 
on  file  in  the  bank,  and  the  signature  was  a  forgery,  the  bank  is 
liable  for  such  payment,  for  failure  to  exercise  due  care  and  ordi- 
nary caution.  Kelley  v.  Buffalo  Sav.  Bank,  180  N.  Y.  171,  72  N.  E. 
995,  69  L.  R.  A.  317,  105  Am.  St.  Rep.  720.  See  "Banks  and  Bank- 
ing," Dec.  Din.  {Key  A'o.)  §  301;    Cent.  Dig.  §§  1162-1176. 

**  See  Foss  v.  Lowell  Five  Cents  Sav.  Bank,  111  Mass.  285.  See 
"Banks  and  Banking,"  Dec.  Dig.  (Keij  No.)  §  301;  Cent.  Dig.  §§  1162- 
1176. 

4  5  Mahon  v.  South  Brooklyn  Sav.  Inst.,  175  N.  Y.  69,  67  N.  E.  118, 
96  Am.  St.  Rep.  603.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  No.) 
§  301;    Cent.  Dig.  §§  1162-1176. 

46  Kelley  v.  Buffalo  Sav.  Bank,  180  N.  Y.  171,  72  N.  E.  995,  69  L. 
R.  A.  317,  105  Am.  St.  Rep.  720.  See  "Banks  and  Banking,"  Dec. 
Dig.  {Key  No.)  §  301;    Cent.  Dig.  §§  1162-1176. 


§§    irj-122)  GIFT    OF   A    DErOSIT  455 

a  tentative  trust,  revocable  at  will  until  the  de- 
positor dies  or  completes  the  gift  by  some  unequiv- 
ocal act,  such  as  delivery  of  the  book  orTibtice  to 
the  beneficiary. 

120.  DEPOSIT  IN  NAME  OF  ANOTHER— Where  one 

person,  with  the  intention  of  making  a  gift,  depos- 
its his  own  money  in  the  name  of  another,  who  as- 
sents, the  transaction  operates  as  a  gift  of  the  de- 
posit. 

121.  DELIVERY  OF  PASS  BOOK— When  a  depositor, 

with  the  intention  of  making  a  gift,  delivers  his 
pass  book  to  another,  who  assents,  the  transaction 
vests  in  him  the  equitable  title  to  the  deposit. 

122.  JOINT  DEPOSIT— Where  one  person,  with  the  in- 

tention of  creating  a  joint  ownership,  deposits  his 
own  money  as  a  joint  deposit  in  the  name  of  him- 
self and  another,  the  transaction  operates  accord- 
ingly as  a  gift ;  but  some  courts  hold  that  delivery 
of  the  pass  book  to  the  other  is  essential. 

Deposit  in  Trust 

A  trust  in  personal  property  may  be  created  by  the  simple 
declaration  of  the  owner  that  he  holds  the  property  in  trust, 
with  or  without  power  of  revocation.  Thus,  a  trust  of  a 
deposit  may  be  created  when  one  person  makes  a  deposit  of 
his  own  money  in  a  savings  bank  "as  trustee"  for  another 
person.  An  intention  to  create  a  trust  is  requisite,*^  and  such 
an  intention  is  not  necessarily  to  be  inferred,  because  of  the 
common  practice  of  persons  who  have  deposits  in  their  own 
name  in  the  full  amount  allowed  to  one  person  to  open  ac- 

i-  Brabrook  v.  Boston  Five  Cents  Suv.  Bank,  104  Mass.  228,  6  Am. 
Rep.  222.  See  "Banks  and  Banlcing,"  Dec.  Dig.  (Key  -Yo.)  §  301;  Cent. 
Dig.  §  1170;   "Tru-sts,"  Dec.  Dig.  {Key  No.)  §  3-J;   Cent.  Dig.  §  U- 


456  SAVINGS  BANKS  (Ch.  13 

counts  in  this  form  for  their  own  benefit.*^  And  the  courts 
generally  agree  that  to  establish  a  trust  something  more  is 
necessary  than  the  mere  opening  of  an  account  in  the  name  of 
the  depositor  in  trust  for  another.*^  Some  cases  go  so  far 
as  to  hold  that  such  a  deposit,  not  communicated  to  and  ac- 
cepted by  the  beneficiary,  is  insufficient  to  perfect  a  trust.^" 
If  there  is  an  express  declaration  of  trust,  accepted  by  the 
beneficiary,  it  is  not  defeated  by  the  fact  that  the  trustee  re- 
tains the  book  and  thereby  retains  control. ^^     In  New  York 

4  8  See  Brabi-ook  v.  Boston  Five  Cents  Sav.  Bank,  104  Mass.  228,  6 
Am.  Rep.  222 ;  Parkman  v.  Suffolk  Sav.  Bank  for  Seamen,  151  Mass. 
218,  24  N.  E.  43.  See  "Banks  and  Banking,"  Dec.  Dig.  {Key  ^0.)  § 
301;  Cent.  Dig.  §  1170 j  "Trusts,"  Dee.  Dig.  (Keg  No.)  §  3.J;  Cent. 
Dig.  §  U. 

•4  9  Parkman  v.  Suffolk  Sav.  Bank  for  Seamen,  151  Mass.  218,  24  N. 
E.  43 ;  Nicklas  v.  Parker,  69  N.  J.  Eq.  743,  61  Atl.  267.  See  "Trusts," 
Dec.  Dig.  (Key  No.)  §  S-i;   Cent.  Dig.  §  ',.'/. 

5  0  Clark  v.  Clark,  108  Mass.  522 ;  Sherman  v.  New  Bedford  Five 
Cents  Sav.  Bank,  138  Mass.  581 ;  Alger  v.  North  End  Sav.  Bank,  146 
Mass.  418,  15  N.  E.  916,  4  Am.  St.  Rep.  331 ;  Supple  v.  Suffolk  Sav. 
Bank  for  Seamen,  198  Mass.  393,  84  N.  E.  432,  126  Am.  St.  Rep.  451. 

A  deceased  person  deposited  money.  In  his  own  name,  as  trustee 
of  certain  persons  individually,  telling  them  that  he  had  done  so. 
The  bank  books  were  in  the  hands  of  one  of  them,  but  he  held  the 
books  merely  as  the  servant  or  agent  of  the  deceased,  and  the  lat- 
ter retained  the  entire  dominion  and  control  of  the  funds,  both  prin- 
cipal and  interest,  during  his  life,  and  he  did  not  intend  that  the  ti- 
tle to  or  interest  in  the  funds  should  pass  from  him  until  after  his 
death.  Held,  that  the  transaction,  being  in  the  nature  of  a  testa- 
mentary disposition,  was  an  attempted  evasion  of  the  statute  of 
wills,  and  that  the  funds  so  deposited  remained  the  property  of  the 
depositor  at  the  time  of  his  death,  and  belonged  to  the  administra- 
tor, to  be  divided  according  to  the  statute  of  distribution.  Nutt  v. 
Morse,  142  Mass.  1,  6  N.  E.  763.  See  "Batiks  and  Banking,"  Dec.  Dig. 
(Key  No.)  §  301;  Cent.  Dig.  §  1170;  "Trusts,"  Dec.  Dig.  (Key  No.)  § 
3-'f;   Cent.  Dig.  §  /,//. 

51  Miller  v.  Clark  (C.  C.)  40  Fed.  15.  See,  also,  Appeal  of  Bucking- 
ham, 60  Conn.  14.3,  22  Atl.  509;  Scott  v.  Berkshire  Co.  Sav.  Bank,  140 
Mass.  157,  2  N.  E.  925.  See  "Trusts,"  Dec.  Dig.  (Key  No)  §  34;  Cent. 
Dig.  §  U. 


§§    119-122)  GIFT    OF   A    DEPOSIT  457 

it  was  formerly  held  that  where  one  person  makes  a  deposit 
as  trustee  for  another  it  was  to  be  presumed,  in  the  absence 
of  evidence  to  the  contrary,  that  a  trust  was  intended;  ''-  but 
this  doctrine  has  been  limited,  and  it  is  now  held^at  such 
a  deposit,  standing  alone,  does  not  establish  an  irrevocable 
trust  during  the  lifetime  of  the  depositor,  but  a  tentative  trust 
merely,  revocable  at  will,  until  the  depositor  dies  or  completes 
the  gift  in  his  lifetime  by  some  unequivocal  act  or  declara- 
tion, such  as  delivery  of  the  book  or  notice  to  the  beneficiary, 
but  that  if  the  depositor  dies  before  the  beneficiary,  without 
revocation  or  disaffirmance,  the  presumption  arises  that  an 
absolute  trust  w^as  created  as  to  the  balance  on  hand  at  the 
depositor's  death. ^^  The  New  York  doctrine  of  a  tentative 
trust,  in  such  cases — that  is,  a  trust  originally  revocable  and 
only  perfected  by  the  death  of  the  beneficiary — while  its  jus- 
tice has  been  approved,  has  been  adversely  criticised  as  in- 
consistent with  the  law  of  trusts. °* 

Deposit  in  Name  of  Another 

Similarly,  it  it  held  that  a  deposit  in  the  name  of  another 
is  not  alone  sufficient  to  prove  a  gift.^'*    The  gift  may  be  per- 

5  2  See  Martin  v.  Funic,  75  N.  Y.  134,  31  Am,  Rep.  446;  Willis  v. 
Smyth,  91  N.  Y.  297.  See  ''Trusts,"  Dec.  Dig.  {Key  No.)  §  34;  Cent. 
Dig.  §  41 

53  In  re  Totter,  179  N.  Y.  112.  71  N.  E.  748.  70  L.  R.  A.  711  (re- 
viemng  prior  cases).  See.  also.  Lattan  v.  Van  Ness,  107  App.  Div. 
393,  95  N.  Y.  Supp.  97.  See  "Trusts,"  Dec.  Dig.  {Key  No.)  §  34;  Cent. 
Dig.  §  44. 

5  4  Nicklas  v.  Parker,  69  N.  J.  Eq.  743,  61  Atl.  267.  See  19  Harv. 
Law  Rev.  207.  See  "Trusts,"  Dec.  Dig.  (Key  No.)  §  34;  Cent.  Dig. 
§  44. 

55  Booth  V.  Bristol  County  Sav.  Bank.  161  Mass.  4.55,  38  N.  E. 
1120 ;  Marcy  v.  Amazeen,  61  N.  H.  131,  60  Am.  Rep.  320 ;  Beaver  v. 
Beaver,  117  N.  Y.  421,  22  N.  E.  940,  6  L.  R.  A.  403.  15  Am.  St.  Rep. 
531 ;  Id.,  137  N.  Y.  59,  32  N.  E.  99S.  See,  also,  Robinson  v.  Ring,  72 
Me.  140,  39  Am.  Rep.  308;  Northrop  v.  Hale,  73  Me.  66;  Pope  v. 
Burlington  Sav.  Bank,  56  Yt.  284,  48  Am.  Rep.  781.  See  "Gifts," 
Dec.  Dig.  (Key  No.)  §§  .W,  66;    Cent.  Dig.  g§  52-57,  65,  135-138. 


458  SAVINGS  BANKS  (Ch.  13 

fected  by  communication  to  and  assent  of  the  donee, ^®  even 
though  the  depositor   retains  the  pass  book,^^  but  not  if  it 
appears  that  an  absolute  gift  was  not  intended. °® 
Delivery  of  Pass  Book  by  Way  of  Gift 

DeHvery  to  a  donee  of  the  pass  book,  containing  entries 
of  deposits  to  the  credit  of  the  depositor,  with  the  intention 
to  give  to  the  donee  the  deposits,  if  he  assents,  vests  in  the  do- 
nee the  equitable  title  to  the  deposits.^ ^  Evidence  of  an  inten- 
tion to  give  is  requisite.^*^  The  gift,  if  made  in  this  way,  must 
be  completed  by  delivery  from  the  donor  to  the  donee  or  to 

5  6  Wickford  Sav.  Bank  v.  Corey,  25  R.  I.  217,  55  Atl.  684.  See. 
also,  Wilsou  V.  Edwards.  79  Ark.  69,  94  S.  W.  927 ;  Eversole  v.  First 
Nat.  Bank  of  London  (Ky.)  51  S.  W.  169.  Cf.  Goelz  v.  People's  Sav. 
Bank,  31  Ind.  App.  67,  67  N.  E.  2.32. 

Where  a  deposit  is  made  without  the  knowledge  of  the  alleged 
donee,  and  the  deposit  book  is  retained  by  the  donor,  if  the  evi- 
dence shows  that  the  donor  intended 'that  the  deposit  should  belong 
to  the  donee,  and  received  and  held  the  book  for  him  until  accept- 
ance by  him,  it  shows  a  completed  gift,  even  though  it  might  have 
been  revoked  before  acceptance.  Scott  v.  Berkshire  Co.  Sav.  Bank. 
140  Mass.  157,  2  N.  E.  92.3.  See  ''Gifts,"  Dec.  Dig.  (Key  No.)  §§  30, 
66;    Cent.  Dig.  §§  5.2-57.  65,  135-138. 

5  7  Smith  V.  Ossipee  Val.  Ten  Cents  Sav.  Bank,  64  N.  H.  22S,  9  Atl. 
792,  10  Am.  St.  Rep.  400.  -See  ''Gifts;'  Dec.  Dig.  {Key  No.)  §§  30,  66; 
Cent.  Dig.  §§  52-57,  65,  135-138. 

58  Hollo  well  Sav.  Inst.  v.  Titcomb,  96  Me.  62,  51  Atl.  249.  -Sec 
"Gifts,"  Dec.  Dig.  {Key  No.)  §§  30,  66;  Cent.  Dig.  §§  52-57,  65,  135- 
138. 

5  9  Meriden  Sav.  Bank  v.  McCormack.  79  Conn.  260,  64  Atl.  338: 
Hill  V.  Stevenson,  63  Me.  364,  18  Am.  Rep.  231 ;  Kimball  v.  Leland. 
110  Mass.  325;  Sheedy  v.  Roach,  124  Mass.  472,  26  Am.  Rep.  680; 
Ridden  v.  Thrall,  125  N.  Y.  572,  26  N.  E.  627,  11  L.  R.  A.  684.  21 
Am.  St.  Rep.  758 ;  Policy  v.  Hicks,  58  Ohio  St.  218,  50  N.  E.  809,  41 
L.  R.  A.  858;  Watson  v.  Watson,  69  Vt.  243,  39  Atl.  201.  Other- 
wise of  an  ordinary  bank  book.  Thomas'  Adm'r  v.  Lewis,  89  Va.  1, 
15  S.  E.  389,  18  L.  R.  A.  170,  37  Am.  St.  Rep.  848.  -See  "Gifts," 
Dec.  Dig.  (Key  No.)  §§  30,  66;   Cent.  Dig.  §§  52^7,  65,  135-138. 

soNogga  V.  Savings  Bank  of  Ansonia,  79  Conn.  42.5,  65  Atl.  129; 
See  Jones  v.  Crisp,  109  Md.  30,  71  Atl.  515.  See  "Gifts,"  Dec.  Dig. 
{Key  No.)  §§  30,  66;   Cent.  Dig.  §§  52-57,  65,  135-138. 


§§    119-122)  GIFT   OF   A    DEPOSIT  459 

some  one  for  the  donee.® ^  Delivery  of  the  book  with  an  or- 
der for  a  sum  less  than  the  deposit,  with  intent  to  make  a 
gift,  is  sufficient  to  vest  title  in  the  donee  of  the  amount  of 
the  order.**-  It  is  possible,  however,  to  make  a  vaticl  gift  of 
a  deposit  in  the  donor's  name  otherwise  than  by  delivery  of 
the  book,  as  by  an  assignment  assented  to  by  the  donee  and 
the  bank.°^ 

Joint  Deposit 

Where  two  persons  own  jointly  a  deposit,  the  survivor  be- 
comes vested  with  the  ownership  of  the  entire  fund.  When 
one  person  makes  a  deposit  in  a  savings  bank  in  the  joint 
names  of  himself  and  another,  if  the  depositor's  donative  pur- 
pose is  established,  it  is  usually  held 'to  create  a  joint  owner- 
ship, and  to  be  a  valid  gift  inter  vivos.''*  This  result  does 
not  follow,  however,  from  the  mere  fact  that  a  deposit  is  made 
in  such  form ;  for  the  depositor  may  always  show  that  the 
money  was  his  own  and  that  such  was  not  his  intention.  And 
as  deposits  are  frequently  made  in  this  form  when  there  is 

61  Dougherty  v.  Moore,  71  Md.  248,  18  Atl.  35,  17  Am.  St.  Rep. 
.524 ;    In  re  Bolin,  136  N.  Y.  177,  32  N.  E.  626. 

Delivery  to  an  agent,  who  is  not  to  deliver  till  the  donee's  death, 
is  not  sufficient.    Augusta  Sav.  Bank  v.  Fogg,  82  Me.  538,  20  Atl.  92. 

If  the  book  is  in  the  hands  of  the  donee,  actual  delivery  is  unnec- 
cessary.  Providence  Inst,  for  Savings  v.  Taft,  14  R.  I.  502;  Good- 
rich's Ex'r  V.  Rutland  Sav.  Bank,  81  Vt.  147,  69  Atl.  651,  17  L.  R.  A. 
(N.  S.)  181.  Cf.  Schollmier  v.  Schoendelen,  78  Iowa,  426.  43  N.  W. 
282,  16  Am.  St.  Rep.  455.  8ee~"Gifts;'  Dec.  Dig.  {Key  No.)  §§  30,  66; 
Cent.  Dig.  §§  52^7,  65,  135-138. 

6  2  Wetherow  v.  Lord,  41  App.  Div.  413,  58  N.  Y.  Supp.  778.  See 
•'Gifts,"  Dec.  Dig.  {Key  ^o.)  §§  30,  66;  Cent.  Dig.  §§  52-57,  65,  135- 
138. 

63  Candee  v.  Connecticut  Sav.  Bank,  81  Conn.  372,  71  Atl.  551,  22 
L.  R.  A.  (N.  S.)  568.  See  ''Gifts,"  Dec.  Dig.  {Key  No.)  §§  30,  66; 
Cent.  Dig.  §§  52-57,  65.  135-138. 

64W'halen  v.  Milholland,  89  Md.  199,  43  Atl.  45,  44  L.  R.  A.  208; 
Kelly  V.  Beers,  194  N.  Y.  49,  86  N.  E.  980;  Id.,  194  N.  Y.  60,  86 
N.'E.  985 ;  Whitehead  v.  Smith,  19  R.  I.  135,  32  Atl.  168.  See  "Gifts;' 
Dec.  Dig.  (Key  No.)  §§  30,  66;   Cent.  Dig.  §§  52-57,  65,  135-138. 


460  SAVINGS   BANKS  (Ch.  13 

no  intention  to  create  a  joint  ownership  and  no  donative  pur- 
pose, the  mere  form  of  the  deposit  is  not  enough  to  establish 
such  intention.®^ 

\Miere  the  depositor  delivers  the  pass  book  to  the  other 
with  the  purpose  of  making  a  gift,  it  is  generally  conceded 
that  a  joint  tenancy  is  created.^®  Some  courts  refuse  to  holdl 
such  deposits  valid  as  gifts,  when  the  depositor  retains  the 
pass  book ;  ^''  but  by  the  better  rule,  if  the  intent  to  create 
a  joint  tenancy  appears,  whether  the  book  be  delivered  or 
not  is  of  no  consequence.®^  This  has  been  explained  on  the 
ground  that  the  transaction  creates  a  contractual  relation  be- 
tween the  bank  and  the  donee,  andl  while  by  retention  of 
the  pass  book  the  donor  still  has  the  power  to  withdraw  the 

65  Bath  Savings  Institution  v.  Fogg,  101  Me.  188,  63  Atl.  731; 
Taylor  v.  Coriell.  66  N.  J.  Eq.  262,  57  Atl.  810 ;  In  re  Boliu,  136  N. 
Y.  177,  32  N.  E.  626 ;  Kelly  v.  Beers,  194  N.  Y.  49,  86  N.  E.  980.  Cf. 
Augsbury  v.  Shurtliff,  180  N.  Y.  138,  72  N.  E.  927;  Hallenbeck  v. 
Hallenbeck,  103  App.  Div.  107,  93  N.  Y.  Supp.  73.  See  "Gifts,"  Dec. 
Dig.  (Key  /Yo.)  §§  30.  66;   Cent.  Dig.  §§  52-57,  65,  135-138. 

6  6  Industrial  Trust  Co.  v.  Scanlon,  26  R.  I.  228,  58  Atl.  786.  See 
'•Gifts;'  Dec.  Dig.  (Key  No.)  §§  30,  66;  Cent.  Dig.  §§  52-57,  65,  135- 
138. 

6  7  Dougherty  v.  Moore,  71  Md.  248,  18  Atl.  35,  17  Am.  St.  Rep. 
524;  Gorman  v.  Gorman,  87  Md.  338,  39  Atl.  1038;  Whalen  v.  MilhoJ- 
land,  89  Md.  199,  43  Atl.  45,  44  L.  R.  A.  208;  Flanagan  v.  Nash. 
185  Pa.  41,  39  Atl.  818. 

Where  plaintiff's  testatrix  deposited  moneys,  and  the  deposit  book 
was  headed  with  the  names  of  testatrix  and  an  intervening  claim- 
ant, "payable  to  either  or  survivor,"  but  it  did  not  appear  that  the 
claimant  ever  had  possession  of  the  book,  or  knew  of  the  deposit 
until  after  the  death  of  testatrix,  she  was  not  entitled  to  recover 
the  same.  Noyes  v.  Institution  for  Savings  in  Newburyport,  164 
Mass.  583,  42  N.  E.  103,  49  Am.  St.  Rep.  484.  See  "Gifts,"  Dec.  Dig. 
(Key  No.)  §§  30,  66;    Cent.  Dig.  §§  52-57,  65,  135-138. 

«8  McElroy  v.  National  Sav.  Bank,  8  App.  Div.  192,  40  N.  Y.  Supp. 
340;  Farrelly  v.  Emigrant  Industrial  Sav.  Bank,  93  App.  Div.  613,  87 
N.  Y.  Supp.  541,  affirmed  179  N.  Y.  594,  72  N.  E.  1141.  See,  also,  Ap- 
peal of  Main,  73  Conn.  638,  48  Atl.  965.  See  "Gifts,"  Dec.  Dig.  (Key 
No.)  §§  30,  66;   Cent.  Dig.  §§  52-57,  65,  135-138. 


§§    119-122)  GIFT    OF   A    DEPOSIT  461 

deposit,  thereby  making  the  gift  of  no  vaUie,  the  legal  effect 
of  the  transaction  as  a  gift  becomes  comjilete  upon  the  con- 
summation of  the  contract  which  the  bank  enters^to  with 
both  jointly,  and  which,  having  the  incident  of  survivorshii). 
vests  the  right  of  action  thereon  in  the  survivor.®" 

Where  there  is  no  intention  to  make  a  gift  inter  vivos,  but 
only  an  intention  that  the  donee  shall  have  what  is  left  after 
the  donor  has  exercised  his  absolute  control  during  his  life, 
the  gift  is  void  as  not  in  compliance  with  the  statute  of  wills.''" 

6  9  Dunu  V.  Houghton  (N.  J.)  51  Atl.  71  (but  see  Taylor  v.  Coriell. 
66  N.  J.  Eq.  2G2,  57  Atl.  SIO).  See.  also,  Schippers  v.  Kempker  (N. 
J.)  67  Atl.  1042;  Industrial  Trust  Co.  v.  Scanlon,  26  R.  I.  228;  58 
Atl.  786.     See  "Gifts,"  Dec.  Dig.  {Key  No.)  §§  30,  66;   Oent.  Dig.  §§ 

•52-57,  65,  135-138. 

7  0  Appeal  of  Main,  73  Conn.  638,  48  Atl.  965;  Taylor  v.  Coriell, 
66  N.  J.  Eq.  262,  57  Atl.  810;  Providence  Inst,  for  Savings  v.  Car- 
penter, 18  R.  I.  287,  27  Atl.  337.  See,  also.  Burns  v.  Burns,  132 
Mich.  441,  92  N.  W.  1077.  See  "aifts,"  Dec.  Dig.  (Key  No.)  §§  30,  66; 
Cent.  Dig.  §§  52-57,  65,  135-138. 


APPENDIX 


NATIONAL   BANK  ACT  AND   OTHER 

STATUTES   OF   THE    UNITED 

STATES    RELATING   TO 

NATIONAL  BANKS 

INCORPORATING  UNDER  THE  HEADINGS  OF  THE  REVISED 

STATUTES    THE    SUBSEQUENT    LAWS,    TOGETHER 

WITH  EXPLANATORY  AND  HISTORICAL  NOTES 


[The  sections  of  the  Revised  Statutes  are  printed  consecutively  ac- 
cording to  their  numbering,  and  the  section  ntimljers,  unless  otherwise 
indicated,  are  those  of  the  Revised  Statutes.  The  exphinatory  and  his- 
torical notes  are  talcen,  with  necessary  changes,  from  the  Compiled 
Statutes  of  the  United  States  1901  and  Compiled  Statutes  of  the 
United  States  Supplement  1911,  compiled  by  Mr.  John  A.  INIallory, 
assisted  by  members  of  the  editorial  staff  of  the  publishers,  the  West 
Publishing   Co.] 


THE  COMPTROLLER  OF  THE  CURRENCY 


Sec. 

324.  Bureau    of  the   Comptroller   of  the 

Currency. 

325.  Comptroller   of   the  Currency. 

326.  Bond   and   oath  of  office   of  Comp- 

troller of  the  Currency. 

327.  Deputy    Comptroller    of    the    Cur- 

rency. 
Act  March  4,  1909,  c.  297,  §  1. 

Assistant     Deputy    Comptroller    of 
the   Currency. 

328.  Clerks. 


Sec. 

329.  Interest  in   national  banks. 

330.  Seal    of    Comptroller    of    the    Cur- 

rency. 

331.  Rooms,   vaults,   furniture,   etc.,    for 

Currency  Bureau. 

332.  Banks  in  District  of  Columbia. 

333.  Report  of   Comptroller. 
Act  April  28,   1902,   c.   594,  §  1. 

Report    of    expenses  of   liquidation 
of  national  banks. 


Sec.  324.     Bureau  of  the  Comptroller  of  the  Currency. — 

There  shall  be  in  the  Department  of  tlie  Trea.sury  a  Bureau 

charged  with  the  execution  of  all  laws  passed  by  Congress 

relating  to  the  issue  and  regulation  of  a  national  currency 

Tiff.Bks.&  B.  (46.3) 


■iCA  APPENDIX 

secured  by  United  States  bonds;  the  chief  officer  of  which 
Bureau  shall  be  called  the  Comptroller  of  the  Currency, 
and  shall  perform  his  duties  under  the  general  direction  of 
the  Secretary  of  the  Treasury. 

Act  June  3,   1864,  c.  106,  §  1,  13  Stat.  99. 

Sec.  325.  Comptroller  of  the  Currency. — The  Comptrol- 
ler of  the  Currency  shall  be  appointed  by  the  President, 
on  the  recommendation  of  the  Secretary  of  the  Treasury, 
by  and  with  the  advice  and  consent  of  the  Senate,  and  shall 
hold  his  office  for  the  term  of  five  years  unless  sooner  re- 
moved by  the  President,  upon  reasons  to  be  communicated 
by  him  to  the  Senate;  and  he  shall  be  entitled  to  a  salary 
of  five  thousand  dollars  a  year. 

Act  June  3,  1864,  c.  106,  §  1,  13  Stat.  99.  Act  March  3,  1875,  c. 
130,  §  2,  18  Stat.  398. 

Sec.  326.  Bond  and  oath  of  office  of  Comptroller  of  the 
Currency. — The  Comptroller  of  the  Currency  shall,  within 
fifteen  days  from  the  time  of  notice  of  his  appointment,  take 
and  subscribe  the  oath  of  office ;  and  he  shall  give  to  the 
United  States  a  bond  in  the  penalty  of  one  hundred  thou- 
sand dollars,  with  not  less  than  two  responsible  sureties, 
to  be  approved  by  the  Secretary  of  the  Treasury,  condi- 
tioned for  the  faithful  discharge  of  the  duties  of  his  office. 
Act  June  3,  1864,  c.  106,  §  1,  13  Stat.  99. 

Sec.  327.  Deputy  Comptroller  of  the  Currency. — There 
shall  be  in  the  Bureau  of  the  Comptroller  of  the  Currency 
a  Deputy  Comptroller  of  the  Currency,  to  be  appointed  by 
the  Secretary,  who  shall  be  entitled  to  a  salary  of  two  thou- 
sand five  hundred  dollars  a  year,  and  who  shall  possess  the 
power  and  perform  the  duties  attached  by  law  to  the  office 
of  Comptroller  during  a  vacancy  in  the  office  or  during  the 
absence  or  inability  of  the  Comptroller.  The  Deputy 
Comptroller  shall  also  take  the  oath  of  office  prescribed  by 
the  Constitution  and  laws  of  the  United  States,  and  shall 
give  a  like  bond  in  the  penalty  of  fifty  thousand  dollars. 
Act  June  3,  1864.  c.  106.  ^  1,  13  Stat.  99. 

A  Deputy  Comptroller,  $3,000,  was  authorized  by  Act  March  3, 
1875,  c.  130,  §  2  (Comp.  St.  1901,  p.  124).  Subsequent  appropria- 
tions have  varied  from  this  amount. 

An  appropriation  for  -  Deputy  Comptroller,  $3,500,  and  also  for 
Deputy  Comptroller,  $3,000,  to  be  appointed  by  the  Secretary  of  the 
Treasury,  was  made  by  a  provision  of  Act  March  4,  1909,  c.  297,  §  1, 
set  forth  below. 


ACTS   OF   (TtXORKSS  465 

ACT  MARCH  4,   1909.  c.  297,   §   1.      fPI.  R.  2r,AC,4.^ 

.Assistant  Deputy  Comptroller  of  the  Currency. — Office 
of  the  Comptroller  of  the  Currency:  For  Comptroller  of 
the  Currency,  five  thousand  dollars;  Deputy  Coaofnroller, 
three  thousand  five  hundred  dollars;  Deputy  Comptroller, 
three  thousand  dollars,  who  shall  be  appointed  by  the  Sec- 
retary of  the  Treasury,  and  shall  possess  the  power  and 
perform  the  duties  attached  by  law  to  the  ofiice  of  Comp- 
troller during  a  vacancy  in  the  office  of  Comptroller  and 
Deputy  Comptroller  or  durin,![>-  the  absence  or  inability  of 
the  Comptroller  and  the  Deputy  Comptroller,  and  said  As- 
sistant Deputy  Comptroller  shall  give  a  like  bond  in  the 
penalty  of  fifty  thousand  dollars ;  *  * 
Act  March  4.  1909.  c.  297,  §  1,  ?i5  Stat.  SfiT. 

This  is  a  provision  of  the  le.sislative,  executive,  anrl  jndicial  appropri- 
ation act  for  the  fiscal  year  ending  June  30,  1910,  cited  above. 

Sec.  328.  Clerks.— The  Comptroller  of  the  Currency 
shall  employ,  from  time  to  time,  the  necessary  clerks,  to  be 
appointed  and  classified  by  the  Secretary  of  the  Treasury, 
to  discharge  such  duties   as  the  Comptroller  shall   direct. 

Act  .Tune  3.  1864.  c.  106.  §  1,  13  Stat.  100. 

Provisions  as  to  the  employment  of  clerks  by  the  heads  of  Depart- 
ments are  contained  in  Rev.  St.  §  169,  and  Act  Aug.  5,  1882,  c.  389, 
§   4,   under  that    section    (Comp.    St.    1901.    p.    ,S.j). 

Clerks  in  the  office  of  the  Comptroller  of  the  Currency  are  provided 
for  in  the  annual  appropriation  acts. 

A  list  of  all  oflicers.  agents,  clerks,  and  other  employes  of  the  office 
of  the  Comptroller  of  the  Currency,   and   persons  connected  with  the 
work  of  the  office,  is  required  to  be  furnished  for  the  Official  Register, 
by  a  provision  of  Act  April  28,   1002,  c.  .')94.   §  1  (Comp.   St.    Supp 
1911.  p.   1083). 

Sec.  329.  Interest  in  national  banks. — It  shall  not  be 
lawful  for  the  Comptroller  or  the  Deputy  Comptroller  of 
the  Currency,  either  directly  or  indirectly,  to  be  interested 
in  any  association  issuing  national  currency  under  the  laws 
of  the  United  States. 

Act  .Tune  3,  1864,  c.  106,  §•  1,  13  Stat.  99. 

Sec.  330.  [As  amended  1875.]  Seal  of  Comptroller  of 
the  Currency. — The  seal  devised  by  the  Comptroller  of  the 
Currency  for  his  office,  and  approved  by  the  Secretary  of 
the  Treasury,  shall  continue  to  be  the  seal  of  office  of'  the 
Comptroller,  and  may  be  renewed  when  necessary.  A  de- 
scription of  the  seal,  with  an  impression  thereof,  and  a  cer- 
TirF.BKS.&  B.— .30 


466  APPENDIX 

tificate  of  approval  by  the  Secretary  of  the  Treasury,  shall 
be  filed  in  the  office  of  the  Secretary  of  State. 

Act  June  3,  1864,  c.  106,  §  2,  13  Stat.  100.  Act  Feb.  18,  1875,  c. 
80,   18  Stat.  317. 

The  amendment  of  this  section  by  Act  Feb.  18.  1875,  c.  80,  cited 
above,  consists  in  the  addition  of  the  last  sentence,  providing  for  the 
filing  of  a  description  of  the  seal,  etc.,  in  the  office  of  the  Secretary 
of  State. 

Sec.  331.  Rooms,  vaults,  furniture,  etc.,  for  Currency 
Bureau. — There  shall  be  assigned,  from  time  to  time,  to  the 
Comptroller  of  the  Currency,  by  the  Secretary  of  the  Treas- 
ury, suitable  rooms  in  the  Treasury  building  for  conduct- 
ing the  business  of  the  Currency  Bureau,  containing  safe 
and  secure  fire-proof  vaults,  in  which  the  Comptroller  shall 
deposit  and  safely  keep  all  the  plates  not  necessarily  in  the 
possession  of  engravers  or  printers,  and  other  valuable 
things  belonging  to  his  Department;  and  the  Comptroller 
shall  from  time  to  time  furnish  the  necessary  furniture, 
stationery,  fuel,  lights,  and  other  proper  conveniences  for 
the  transaction  of  the  business  of  his  office. 
Act  June  3,  1864,  c.  106,  §  3,  13  Stat.  100. 

Sec.  332.  Banks  in  District  of  Columbia. — The  Comp- 
troller of  the  Currency,  in  addition  to  the  powers  conferred 
upon  him  by  law  for  the  examination  of  national  banks, 
is  further  authorized,  whenever  he  may  deem  it  useful, 
to  cause  examination  to  be  made  into  the  condition  of  any 
bank  in  the  District  of  Columbia  organized  under  act  of 
Congress.  The  Comptroller,  at  his  discretion,  may  report 
to  Congress  the  results  of  such  examination.  The  expense 
necessarily  incurred  in  any  such  examination  shall  be  paid 
out  of  any  appropriation  made  by  Congress  for  special  bank 
examinations. 

Act  Jan.  20.  1873,  c.  43,  17  Stat.  412. 

Sec.  333.  [As  amended  1875.]  Report  of  Comptroller. 
— The  Comptroller  of  the  Currency  shall  make  an  annual 
report  to  Congress,  at  the  commencement  of  its  session, 
exhibiting — 

First.  A  summary  of  the  state  and  condition  of  every 
association  from  which  reports  have  been  received  the  pre- 
ceding year,  at  the  several  dates  to  which  such  reports 
refer,  wnth  an  abstract  of  the  whole  amount  of  banking 
capital  returned  by  them,  of  the  whole  amount  of  their 


ACTS   OF   CONGKESS  467 

debts  and  liabilities,  the  amount  of  circulating  notes  out- 
standing-, and  the  total  amount  of  means  and  resources, 
specifying  the  amount  of  lawful  money  held  by  them  at  the 
times  of  their  several  returns,  and  such  other  intJTrmation 
in  relation  to  such  associations  as,  in  his  judgment,  may 
be  useful. 

Second.  A  statement  of  the  associations  whose  business 
has  been  closed  during  the  year,  with  the  amount  of  their 
circulation  redeemed  and  t,he  amount  outstanding. 

Third.  Any  amendment  to  the  laws  relative  to  banking 
by  which  the  system  may  be  improved,  and  the  security 
of  the  holders  of  its  notes  and  other  creditors  may  be  in- 
creased. 

Fourth.  A  statement  exhibiting  under  appropriate  heads 
the  resources  and  liabilities  and  condition  of  the  banks, 
banking  companies,  and  savings-banks  organized  under  the 
laws  of  the  several  States  and  Territories;  such  informa- 
tion to  be  obtained  by  the  Comptroller  from  the  reports 
made  by  such  banks,  banking  companies,  and  savings-banks 
to  the  legislatures  or  officers  of  the  dififerent  States  and 
Territories,  and,  vvhere  such  reports  cannot  be  obtained, 
the  deficiency  to  be  supplied  from  such  other  authentic 
sources  as  may  be  available. 

Fifth.  The  names  and  compensation  of  the  clerks  em- 
ployed by  him,  and  the  whole  amount  of  the  expenses  of 
the  banking  department  during  the  year. 

Act  June  3,  1SG4,  c.  106,  ^  61,  13  Stat.  117.  Act  Feb.  19,  1S73, 
c.  166,  §  1,  17  Stat.  466.     Act  Feb.  IS,  1875,  c.  80,  18  Stat.  317. 

The  amendment  of  this  section  by  Act  Feb.  18,  1875,  c.  80,  cited 
above,  consists  in  the  insertion,  after  the  word  "Congress,"  near  the 
beginning  of  the  section,  of  the  words,  "at  the  commencement  of  its 
session." 

Provisions  applicable  to  all  the  Departments,  as  to  the  time  for 
making  annual  reports,  and  for  furnishing  copies  to  the  printer,  are 
contained  in  Rev.   St.   §§  in5,  106    (Comp.   St.   1001.  p.  07). 

The  printing  and  distribution  of  the  report  of  the  Comptroller  of 
the  Currency  are  provided  for  by  Act  Jan.  12,  1805,  c.  23,  §  73 
(Comp.   St.  1001,  p.  2570). 

The  report  of  the  Comptroller  is  to  include  the  expenses  of  liquida- 
tion of  failed  national  banks,  by  a  provision  of  Act  April  28,  1902, 
c.  594,  §  1,  set  forth  below. 

ACT  APRIL  28,   1902,  c.  594,  §    1. 

Report   of   expenses  of  liquidation  of  national   banks. — 

*  *  That  the  Comptroller  of  the  Currency  is  herebv  di- 
rected to  include  in  his  Annual  Report  to  the  Speaker  of 
the    House   of   Representatives,   expenses   incurred    during 


468 


APPENDIX 


each  year,  in  liquidati6n  of  each  failed  national  bank  sep- 
arately. 

Act  April  28.  1902.  c.  594.  §  1.  .S2  Stat.  1.^8. 

This  is  a  proviso  annexed  to  an  appropriation  for  the  office  of  the 
Comptroller  of  the  Currency  in  the  legislative,  executive,  and  judicial 
appropriation  act  for  the  fiscal  year  ending  June  30.  190.3.  cited  above. 


SUITS  INVOLVING  NATIONAL  BANKS 


Sec. 

S84.  Instruments  and  papers  of  Comp- 
troller of  the  Currency. 

885.  Organization  certificates  of  nation- 
al  banks. 


Sec. 

380.  Conduct  of  suits  involving  national 

banks. 
Act  March  3,  1911,  c.  231,  §  24  (16). 

Jurisdiction  of  the  district  courts — 

Citizenship,  etc. 

Sec.  380.     Conduct  of  suits  involving  national  banks, — 

All  suits  and  proceedings  arising  out  of  the  provisions  of 
law  governing  national  banking  associations,  in  which  the 
United  States  or  any  of  its  officers  or  agents  shall  be  par- 
ties, shall  be  conducted  by  the  district  attorneys  of  the 
several  districts  under  the  direction  and  supervision  of  the 
Solicitor  of  the  Treasury. 

Act  Feb.  25.  1863.  c.  58,  §  55,  12  Stat.  680.  Act  June  3.  1864,  c, 
106,  §  56,  13  Stat.  116. 

ACT  MARCH  3,   1911,  c.  231,  §  24(16). 

Jurisdiction  of  the  district  courts — Citizenship,  etc. — The 
district  courts  shall  have  jurisdiction  as  follows: 

Sixteenth.    Of  all  cases  commenced  by  the  United  States, 
or  by  direction  of  any  officer  thereof,  against  any  national 
banking  association,  and  cases  for  winding  up  the  aflfairs 
of  any  such  bank ;   and  of  all  suits  brought  by  any  banking 
association  established  in  the  district  for  which  the  court  is 
held,  under  the  provisions  of  title  "National  Banks,"  Re- 
vised Statutes,  to  enjoin  the  Comptroller  of  the  Currency, 
or  any  receiver  acting  under  his  direction,  as  provided  by 
said  title.    And  all  national  banking  associations  established 
under  the  laws  of  the  United  States  shall,  for  the  purposes 
of  all  other  actions  by  or  against  them,  real,  personal,  or 
mixed,  and  all  suits  in  equity,  be  deemed  citizens  of  the 
States  in  which  they  are  respectively  located. 
Act  March  3,  1911,  c.  231,  §  24  (16).  36  Stat.  1092. 
This  section  is  part  of  an  act  to  codify,  revise,  and  amend  the  laws 
relating  to  the  judiciary,  which   took  effect  January  1,  1912.     Sect!"" 
297  contains  a  list  of  the  sections  of  the  Revised  Statutes  and  of  acts 
and  parts  of  acts  repealed. 

Section  49  provides  that  all  proceedings  by  any  national  banking  as- 
sociation to  enjoin  the  Comptroller  of  the  Curr;')!cy.  under  the  provi- 
sions of  any  law  relating  to  national  banking  associations,  shall  be 
had  in  the  district  where  such  association  is  located. 


ACTS  OF  CONGUESS 


409 


Sec.  884.  Instruments  and  papers  of  Comptroller  of  the 
Currency. — Every  ccrlilicalc.  assignment,  and  conveyance 
executed  by  the  Comptroller  of  the  Currency,  in  pursuance 
of  law,  and  sealed  with  his  seal  of  office,  shall  be^feceived 
in  evidence  in  all  places  and  courts ;  and  all  copies  of  pa- 
pers in  his  office,  certified  by  him  and  authenticated  by 
the  said  seal,  shall  in  all  cases  be  evidence  equally  with 
the  originals.  An  impression  of  such  seal  directly  on  the 
paper  shall  be  as  valid  as  if  made  on  wax  or  wafer. 
Act  June  3,   1S64.  c.   106,   §  2,   1.''.  Stat.  100. 

Sec.  885.     Organization  certificates  of  national  banks. — 

Copies  of  the  organization  certificate  of  any  national  bank- 
ing association,  duly  certified  by  the  Comptroller  of  the 
Currency,  and  authenticated  by  his  seal  of  office,  shall  be 
evidence  in  all  courts  and  places  within  the  jurisdiction 
of  the  United  States  of  the  existence  of  the  association, 
and  of  every  matter  which  could  be  proved  by  the  produc- 
tion of  the  original  certificate. 

Act  June  3,   1864,   c.   106,   §   6,   13   Stat.  101. 

Provisions  relating  to  the  requisites  of  the  certificates,  and  the  ac- 
knowledgment and  filing  thereof,  are  contained  in  Rev.  St.  §§  5134, 
513.-,. 

INTERNAL  REVENUE— BANKS  AND  BANKERS 


Sec. 

3407.  Definition       of       words       "bank," 

"banker." 

3408.  [Superseded   in   part,   and  remain- 

ing  part  repealed.] 
Act  March  3,  18S3,   c.  121. 

1.  Tax  on  capital  and  deposits  of 
banks,  and  stamp  taxes,  re- 
pealed. 

3409.  Taxes,  when  payable. 

3410.  [Superseded.] 

3411.  Circulation,    when    exempted   from 

tax. 

3412.  3413.  [Superseded.] 

Act  Feb.  8,  1ST5,  c.  3fi,  §§  19-21. 

19.  Tax  on  circulation  of  banks  other 

than  national  banks. 

20.  Tax  on  notes  of  State  banks,  mu- 

nicipal corporations,  etc.,  used 
as  circulation  and  paid  out  by 
banks. 


See. 
21.  Banks'   returns;    payment  of  tax; 
penalties. 
Act  March   3,   1875.   c.   Ifi7. 

Tax  on  circulation  of  mining  or 
manufacturing  corporations;  ap- 
plication of  Rev.  St.  §  3412. 

3414.  Banks'   and   bankers'   monthly   re- 

turns. 

3415.  In  default  of  return.  Commission- 

er to  estimate,  etc. 

3416.  State    banks    converted    into    na- 

tional     banks;       returns,      how 
made. 

^417.  Provisions  for  bank  tax  andi  re- 
turns not  to  apply  to  national 
banks. 

Act  March  1,  1879,   c.  123,  §  22. 
Taxes   on  insolvent  b^nks. 


Sec.  3407.  Definition  of  words  "bank,"  "banker." — Ev- 
ery incorporatetl  or  other  bank,  and  every  person,  firm, 
or  company  having  a  place  of  business  where  credits  are 


470  APPENDIX 

opened  by  the  deposit  or  collection  of  money  or  currency, 
subject  to  be  paid  or  remitted  upon  draft,  check,  or  order, 
or  where  money  is  advanced  or  loaned  on  stocks,  bonds, 
bullion,  bills  of  exchange,  or  promissory  notes,  or  where 
stocks,  bonds,  bullion,  bills  of  exchange,  or  promissory 
notes  are  received  for  discount  or  for  sale,  shall  be  regarded 
as  a  bank  or  as  a  banker. 

Act  June  30.  1864.  c.  173,  §  79,  13  Stat.  251.  Act  July  13,  186G,  c. 
184,  §  9,  14  Stat.   115. 

Sec.  3408.  [Superseded  in  part.  Act  Feb.  8,  1875,  c. 
36,  §  19.  Remaining  part  repealed  and  superseded.  Act 
March  3,  1883,  c.  121,  §  1.] 

This  section  contained  three  subsections.  The  first  imposed  a  tax 
on  deposits,  the  second  on  capital,  and  the  third  on  circulation,  of 
banking  institutions.  The  first  and  second  subsections  are  repealed 
by  Act  March  3,  1883.  e.  121,  §  1,  set  forth  below.  The  third  sub- 
section is  superseded  by  Act  Feb.  8,  1875,  c.  36,  §  19,  post,  under 
Rev.  St.  §  3412. 

The  special  taxes  imposed  on  bankers  by  the  war  revenue  act,  Act 
June  13,  1898.  c.  448.  §  2.  and  the  amendment  thereto  by  Act  March 
2,  1901,  c.  806,  §  2  (Comp.  St.  1901.  p.  2286),  are  abrogated  by  the 
repeal  of  that  section  by  Act  April  12,  1902,  c.  500,  §  2  (Comp.  St. 
Supp.    1911.    p.   977). 

Taxation  of  national  banks  is  provided  for  by  Rev.  St.  §§  5214- 
5219,  and  subsequent  provisions   set  forth  under  those  sections. 

ACT  MARCH  3,   1883,  c.  121. 

An  Act  to  Reduce  Internal  Revenue  Taxation,  and  for 

Other  Purposes.  (22  Stat.  488.) 
Tax  on  capital  and  deposits  of  banks,  and  stamp  taxes, 
repealed. — Be  it  enacted,  &c.,  That  the  taxes  herein  speci- 
fied imposed  by  the  laws  now  in  force  be,  and  the  same 
are  hereby,  repealed,  as  hereinafter  provided,  namely :  On 
capital  and  deposits  of  banks,  bankers,  and  national  bank- 
ing associations,  except  such  taxes  as  are  now  due  and  pay- 
able ;  and  on  and  after  the  first  day  of  July,  eighteen  hun- 
dred and  eighty-three,  the  stamp  tax  on  bank  checks, 
drafts,  orders,  and  vouchers,  and  the  tax  on  matches,  per- 
fumery, medicinal  preparations,  and  other  articles  imposed 
by  Schedule  A  following  section  thirty-four  hundred  and 
thirty-seven  of  the  Revised  Statutes:  *  *  [Part  of  sec- 
tion omitted  temporar}'.] 

Act  March  3.  1883.  c.  121,  §  1,  22  Stat.  488. 

The  taxes  on  capital  and  deposits  of  backs,  etc.,  repealed  by  this 
section,  are  those  imposed  by  Rev.  St.  §•  3408,  subsecs.  1,  2. 

The  stamp  taxes,  also  repealed  bv  this  section,  are  those  imposed 
by  Rev.  St.  §§  3418,  3419   (Comp.  St.  1901,  p.  2252). 


ACTS   OF  CONGRESS  471 

^  Sec.  3409.  Taxes,  when  payable. — The  taxes  provided  in 
the  preceding;  section  shall  be  paid  semiannuallv,  on  the 
first  day  of  January  and  the  first  day  of  July ;  but' the  same 
shall  be  calculated  at  the  rate  per  month  as  prescnBed  by 
said  section,  so  that  the  tax  for  six  months  shall  not  l/e 
less  than  the  aggregate  would  be  if  such  taxes  were  col- 
lected monthly. 

Act  .Tunp  .30,  1864.  c.  17.*5.  S  110,  13  Stat.  277.  Act  Jiilv  1:3,  ISfJfi. 
c.  1.S4.  i)  0.  14  Stat.  146.     Act  .Tune  6,  1872,  c.  315,  §  37.  17  Stat.  2;16. 

The  preceding  section  is  either  repealed  or  superseded.  See  note 
under   that  section. 

The  tax  on  bank  circuhition  imposed  hy  Act  Feb.  8,  1875,  c.  .36,  § 
19,  post,  under  Rev.  St.  §  3412,  is  required  to  be  paid  at  the  time  and 
in  the  manner  provided  by  hnv  for  the  payment  of  taxes  on  deposits, 
capital,  and  circulation  by  section  21  of  said  act,  also  set  forth  under 
Itev.  St.  §  3412. 

Sec.  3410.     [Superseded.    Act  March  3,  1883,  c.  121,  §  1.] 

This  section  provided  that  the  capital  of  a  State  bank  ceasing  to 
exist,  or  being  converted  into  a  national  bank,  should  be  assumed  to 
be  the  capital  as  it  existed  immediately  before  such  bank  ceased  to 
exist  or  was  so  converted.  It  is  superseded  by  Act  March  3,  1883, 
c.  121.  §  1,  ante,  under  Rev.  St.  $  ;>408. 

Sec.  3411.  Circulation,  when  exempted  from  tax. — 
Whenever  the  outstanding  circulation  of  any  bank,  asso- 
ciation, corporation,  company,  or  person  is  reduced  to  an 
amount  not  exceeding  five  per  centum  of  the  chartered  or 
declared  capital  existing  at  the  time  the  same  was  issued, 
said  circulation  shall  be  free  from  taxation ;  and  whenever 
any  bank  which  has  ceased  to  issue  notes  for  circulation 
deposits  in  the  Treasury  of  the  United  vStates,  in  lawful 
money,  the  amount  of  its  outstanding  circulation,  to  be  re- 
deemed at  par,  under  such  regulations  as  the  Secretary  of 
the  Treasury  shall  prescribe,  it  shall  be  exempt  from  any 
tax  upon  such  circulation. 

Act  March  3,  1865,  c.  78,  §  14,  13  Stat.  486.  Act  Julv  13,  1866,  c. 
184,  §  9  bis,  14  Stat.  146. 

Sees.  3412,  3413.  [Superseded.  Act  Feb.  8,  1875,  c.  36, 
§  20.] 

Section  3412  required  banks  to  pay  a  tax  on  the  amoupt  of  notes 
of  a  person  or  State  l)ank  or  State  banking  association  used  for  cir- 
culation and  paid  out  by  them.  It  is  construed,  as  to  its  application 
to  pending  cases,  by  Act  March  3,  1875,  c.  167,  set  forth  below. 

Section  3413  required  banks  to  pay  a  tax  on  the  amount  of  notes 
of  municipal  corporations  paid  out  by  them. 

Roth  these  sections  are  superseded  by  Act  Feb.  8,  1875,  c.  36,  § 
20,   set   forth   below. 


472  APPENDIX 

ACT  FE3.  8,  1875,  e.  36,  §§  19  21. 

Tax  on  circulation  of  banks  other  than  national  banks. — 
Sec.  19.  That  every  person,  firm,  association  other  than 
national  bank  associations,  and  every  corporation,  State 
bank,  or  State  banking  association,  shall  pay  a  tax  of  ten 
per  centum  on  the  amount  of  their  own  notes  used  for  cir- 
culation and  paid  out  by  them. 

Act  Feb.  8,  1875,  c.  36,  §  19,  18  Stat.  311. 

This  section  supersedes  Rev.   St.  §  3408,  subsec.  3. 

Tax  on  notes  of  State  banks,  municipal  corporations,  etc., 
used  as  circulation  and  paid  out  by  banks. — Sec.  20.  That 
every  such  person,  firm,  association,  corporation.  State  bank, 
or  State  banking  association,  and  also  every  national  bank- 
ing association,  shall  pay  a  like  tax  of  ten  per  centum  on 
the  amount  of  notes  of  any  person,  firm,  association  other 
than  a  national  banking  association,  or  of  any  corporation, 
State  bank,  or  State  banking  association,  or  of  any  town, 
city,  or  municipal  corporation,  used  for  circulation  and  paid 
out  by  them. 

Act   Fob.   8,   1875,   c.  36,   §   20.   18   Stat.   311. 

This  section  supersedes  Rev.  St.  §§  3412,  3413. 

Banks'  returns;  payment  of  tax;  penalties. — Sec.  21. 
That  the  amount  of  such  circulating  notes,  and  of  the  tax 
due  thereon,  shall  be  returned,  and  the  tax  paid  at  the 
same  time,  and  in  the  same  manner,  and  with  like  penalties 
for  failure  to  return  and  pay  the  same,  as  provided  by  law 
for  the  return  and  payment  of  taxes  on  deposits,  capital, 
and  circulation,  imposed  by  the  existing  provisions  of  in- 
ternal revenue  law. 

Act  Feb.  8,  1875,  c.  36,  §  21,  IS  Stat.  311. 

Insolvent   banks    are   not    to   be   required   to    pay    the    tax,   by   Act 

March  1,  1879,  c.  125,  §  22.  post,  under  Rev.   St.  §  3417. 

ACT  MARCH  3,  1875,  c.  167. 

An  Act  to  Authorize  the  Secretary  of  the  Treasury  to 
Adjust  and  Remit  Certain  Taxes  and  Penalties  Claimed 
to  be  Due  from  Mining  and  Other  Corporations,  and 
for  Other  Purposes.     (Is  Stat.  507.) 

Tax  on  circulation  of  mining  or  manufacturing  corpora- 
tions ;  application  of  Rev.  St.  §  3412, — Be  it  enacted,  &C., 
That  the  Secretary  of  the  Treasury  be,  and  he  is  hereby, 
authorized   and   directed   to   settle   and   release  any  claims 


ACTS   OF   CONGRESS  47^ 

for  tax  on  circulation  of  evidences  of  indebtedness  made 
against  any  mining-,  manufacturing  or  other  corporations 
other  than  against  any  national  banking-association,  State 
bank,  or  banking-association,  by  such  corporatioU^'^aying 
the  tax,  without  penalty,  that  shall  have  accrued  thereon 
since  November  first,  eighteen  hundred  and  seventy-three ; 
and  that  the  provisions  of  section  three  thousand  four  hun- 
dred and  twelve  of  the  Revised  Statutes  of  the  United 
States  shall  not  be  construed  in  pending  cases,  except  as 
to  national  banking-associations,  to  apply  to  such  evidences 
of  indebtedness  issued  and  reissued  prior  to  the  passage 
of  this  act,  byUt  said  section  shall  be  construed  as  applying 
to  such  evidences  of  indebtedness  issued  after  the  passage 
hereof. 

Act  jNIarch  3,  187;j,  c.  107.  IS  Stat.  507. 

Kev.  St.  §  3412,  mentioned  in  this  act,  is  superseded  by  a  previous 
provision.  Act  Feb.  S,  187"),  c.  36,  §•  20,  set  forth  above. 

Sec.  3414.  Banks'  and  bankers'  monthly  returns. — A 
true  and  complete  return  of  the  monthly  amount  of  cir- 
culation, of  deposits,  and  of  capital,  as  aforesaid,  and  of 
the  monthly  amount  of  notes  of  persons,  town,  city,  or 
municipal  corporation,  State  banks,  or  State  banking  asso- 
ciations paid  out  as  aforesaid  for  the  previous  six  months, 
shall  be  made  and  rendered  in  duplicate  on  the  first  day 
of  December  and  the  first  day  of  June,  by  each  of  such 
banks,  associations,  corporations,  companies,  or  persons,' 
with  a  declaration  annexed  thereto,  under  the  oath  of  such 
person,  or  of  the  president  or  cashier  of  such  bank,  asso- 
ciation, corporation,  or  company,  in  such  form  and  manner 
as  may  be  prescribed  by  the  Commissioner  of  Internal  Rev- 
enue, that  the  same  contains  a  true  and  faithful  statement 
of  the  amounts  subject  to  tax,  as  aforesaid  ;  and  one  copy 
shall  be  transmitted  to  the  collector  of  the  district  in  which 
any  such  bank,  association,  corporation,  or  company  is  sit- 
uated, or  in  which-  such  person  has  his  place  of  business, 
and  one  copy  to  the  Commissioner  of  Internal  Revenue. 
Act  June  30,  1SG4,  c.  173,  §  110,  18  Stat.  27S.     Act  July  13.  1866, 

c.  184,  §  9  bis,  14  Stat.  147.     Act  March  26,  1867,  c.  8,  §  ?,  15  Stat:  6. 

Act  June  6,  1872,  c.  315,  §  37,  17  Stat.  256.     Act  Dec.  24,  1872,  c. 

13.  &  5,   17  Stat.  403. 
The  taxes  on  deposits  and  capital  are  repealed  by  Act  March  3,  1883, 

c.  121,  §  1,  ante,  under  Kev.  St.  §  .3408. 
The   taxes   on  circulation   of  banks   other   than  national  banks,  and 

on  banks  using  as  circulation  or  paying  out  the  notes  of  State  banks 

and  municipal  corporations,  are  fixed   by  Act   Feb.   8,   1875,   c.   36,  i^^ 


474  APPENDIX 

19,  20,  ante,  under  Rev.  St.  §■  3412.  Banks  are  required  to  make  the 
return's  of  such  circulation,  as  prescribed  by  this  section,  by  section 
21  of  said  act,  also  set  forth  under  Rev.  St.  §  3412. 

Sec.  3415.  In  default  of  return,  Commissioner  to  esti- 
mate, etc.— In  default  of  the  returns  provided  in  the  pre- 
ceding section,  the  amount  of  circulation,  deposit,  capital, 
and  notes  of  persons,  town,  city,  and  municipal  corpora- 
tions, State  banks,  and  State  banking  associations  paid  out, 
as  aforesaid,  shall  be  estimated  by  the  Commissioner  of 
Internal  Revenue,  upon  the  best  information  he  can  ob- 
tain. And  for  any  refusal  or  neglect  to  make  return  and 
payment,  any  such  bank,  association,  corporation,  company, 
or^erson  so  in  default  shall  pay  a  penalty  of  two  hundred 
dollars,  .besides  the  additional  penalty  and  forfeitures  pro- 
vided in  other  cases. 

Act  June  30.  1S64.  c.  173,  §  110,  13  Stat.  278.     Act  July.  13.  1866,  c. 

184,  §  9  bis.  14  Stat.  146.     Act  Dec.  24,  1872,  c.  13,  §  2,  17  Stat.  402. 
See   note   under   preceding   section. 

Sec.  3416.  State  banks  converted  into  national  banks; 
returns,  how  made.— Whenever  any  State  bank  or  banking 
association  has  been  converted  into  a  national  banking  asso- 
ciation, and  such  national  banking  association  has  assumed 
the  liabilities  of  such  State  bank  or  banking  association, 
including  the  redemption  of  its  bills,  by  any  agreement  or 
understanding  whatever  with  the  representatives  of  such 
State  bank  or  banking  association,  such  national  banking 
association  shall  be  held  to  make  the  required  return  and 
payment  on  the  circulation  outstanding,  so  long  as  such 
circulation  shall  exceed  five  per  centum  of  the  capital  before 
such  conversion  of  such  State  bank  or  banking  association. 
Act  March  3.  1865,  c.  78,  §  14,  13  Stat.  486.     Act  July  13,  1866,  c. 

184,  §  9  bis,  14  Stat.  146. 

Sec.  3417.  [As  amended  IS75.]  Provisions  for  bank  tax 
and  returns  not  to  apply  to  national  banks. — The  provisions 
of  this  chapter,  relating  to  the  tax  on  the  deposits,  capital, 
and  circulation  of  banks,  and  to  their  returns,  except  as 
contained  in  sections  thirty-four  hundred  and  ten,  thirty- 
four  hundred  and  eleven,  thirty-four  hundred  and  twelve, 
thirty-four  hundred  and  thirteen,  and  thirty-four  hundred 
and  sixteen,  and  such  parts  of  sections  thirty-four  hundred 
and  fourteen,  and  thirty-four  hundred  and  fifteen  as  relate 
to  the  tax  of  ten  per  centum  on  certain  notes,  shall  not  ap- 


ACTS   OF   CONGRESS 


475 


ply  to  associations  which  are  taxed  under  and  by  virtue  of 
Title  "National  Banks." 

Act  June  30,  l.St;4.  c.  173,  §  110,  13  Stat.  278.  Act  July  13,  1806, 
c.  184,  §  J)  bis,  14  Stat.  146.     Act  Feb.  18.  1875,  c.  80.  Ibj.i5tat.  31'J. 

This  .st(ti(ni  is  amended  by  Act  Feb.  18.  1875,  c.  SO,  cited  above, 
by  insertiuK,  among  the  sections  mentioned,  the  words  "thirty-four 
hundred   and   thirteen,"    as   set   forth   here. 

The  tax(>s  on  deposits  and  capital  are  abolished  by  Act  Marf:'h  3, 
1883.  c.  11*1,  S  1,  ante,  under  Rev.  St.  ^  3408. 

Taxes  are  not  to  bo  paid  by  insolvent  banics,  and  the  taxes  are  to 
be  abated  from  insolvent  national  banks,  by  Act  March  1,  1879,  c. 
12.J.  S  22,   set  forth  below. 

ACT  MARCH  1,   1879,  c.  125,  §  22. 

Taxes  on  insolvent  banks. — That  whenever  and  after  any 
bank  has  ceased  to  do  business  by  reason  of  insolvency  or 
bankruptcy,  no  tax  shall  be  assessed  or  collected,  or  paid 
into  the  Treasury  of  the  United  States,  on  account  of  such 
bank,  which  shall  diminish  the  assets  thereof  necessary  for 
the  full  payment  of  all  its  depositors;  and  such  tax  shall 
be  abated  from  such  national  banks  as  are  found  by  the 
Comptroller  of  the  Currency  to  be  insolvent;  and  the  Com- 
missioner of  Internal  Revenue,  when  the  facts  shall  so  ap- 
pear to  him,  is  authorized  to  remit  so  much  of  said  tax 
against  insolvent  State  and  savings  banks  as  shall  be  found 
to  affect  the  claims  of  their  depositors.  *  *  [Part  of  sec- 
tion omitted  superseded.     Act  March  3,  1883,  c.  121,  §  1.] 

Act  March  1,  1879,  c.  125,  §  22,  20  Stat.  ,351. 

The  part  of  this  section  omitted  related  to  the  tax  on  deposits  of 
savings  banks.  It  is  superseded  by  Act  March  3,  1883,  c.  121,  §  1, 
ante,  under  Rev.  St.  §  3408. 

MISCELLANEOUS 


Sec. 

3473.  Duties    and    other    debts    to    the 

United  States,  in  what  currency 

to   be   paid. 
3475.  National  bank  notes  receivable  for 

debts    of    United   States,    except. 
Act  June  23,  1874,  c.  455,  §  1. 

Maceration      of      national      banli 

notes,    etc. 


Sec. 

Act  June  30,  1876,  c.  156,  §  5. 

Counterfeit  notes  to  be  marked. 
Act  Aug.   13,  1894,   c.  2S1. 

1.  State    taxation    of    national    bank 

notes,   etc. 

2.  Taxation  of  national  banks  not  af- 

fected by  act. 


Sec.  3473.  [As  amended  1877.]  Duties  and  other  debts 
to  the  United  States,  in  what  currency  to  be  paid. — All  du- 
ties on  imports  shall  be  paid  in  gold  and  silver  coin  only, 
coin  certificates  or  in  demand  Treasury  notes,  issued  under 
the  authority  of  the  acts  of  July  seventeen,  eighteen  hun- 
dred  and   sixty-one,   chapter   five;    and   February   twelve. 


476  APPENDIX 

eighteen  hundred  and  sixty-two,  chapter  twenty;  and  all 
taxes  and  all  other  debts  and  demands  than  duties  on  im- 
ports, accruing  or  becoming  due  to  the  United  States,  shall 
be  paid  in  gold  and  silver  coin,  Treasury  notes,  United 
States    notes,  or  notes  of  national  banks. 

Act  Aug.  6,  1846,  c.  90,  §  IS.  9  Stat.  64.  Act  Dec.  23,  1857,  c.  1, 
§  6,  11  Stat.  258.  Act  Julv  17,  1861,  c.  5,  §  1,  12  Stat.  259.  Act 
Aug.  5.  1861,  c.  46,  §  5,  12  Stat.  313.  Act  Feb.  12,  1862,  c.  20,  12 
Stat.  338.  Act  Feb.  25,  1862,  c.  33,  §■§  1,  5,  12  Stat.  345.  346.  Act 
July  11,  1862,  c.  142,  §  1,  12  Stat.  532.  Act  March  3,  1863.  c.  73,  «§ 
1,  5,  12  Stat.  710,  711.  Act  June  3,  1864,  c.  106,  §  23,  13  Stat.  106. 
Act  June  30,  1864,  c.  172,  §  2.  13  Stat.  218. 

This  section  is  amended  by  Act  Feb.  27,  1877,  c.  69.  19  Stat.  249, 
by  inserting,  after  the  words  "goFd  and  silver  coin  only,"  the  words 
"coin  certificates,"  and  by  striking  out,  after  the  words  "notes  of 
national  banks,"  the  words  at  the  end  of  the  section  as  originally 
enacted,  "and  upon  every  such  payment  credit  shall  be  given  for  the 
amount  of  principal  and  interest  due  on  any  Treasury  note  not  re- 
ceived in  payment  on  the  day  when  the  same  are  received." 

Sec.  3475.  National  bank  notes  receivable  for  debts  of 
United  States,  except. — The  notes  of  national  banks  shall 
be  received  at  par  for  all  debts  and  demands  owing  by 
the  United  States  to  any  person  within  the  United  States, 
except  interest  on  the  public  debt,  or  in  redemption  of  the 
national  currency. 

Act  June  3.  1864,  c.  106,  §  23,  13  Stat.  106. 

National  bank  notes  shall  be  received  at  par  in  all  parts  of  the 
,  United  States  in  payment  of  taxes,  excises,  public  lands,  and  all 
other  dues  to  the  United  States,  except  duties  on  imports;  and  also 
for  all  salaries  and  other  debts  and  demands  owing  by  the  United 
States  to  individuals,  corporations,  and  associations  within  the  United 
States,  except  interest  on  the  public  debt,  and  in  redemption  of  the 
national  currency, — by  Rev.  St.  §  5182. 

ACT  JUNE  23,  1874,  c.  455,  §  1. 

Maceration  of  national  bank  notes,  etc. —    *    *    For  the 

maceration  of  national  bank  notes.  United  States  notes,  and 
other  obligations  of  the  United  States  authorized  to  be  de- 
stroyed *  *  ;  and  that  all  such  issues  hereafter  de- 
stroyed may  be  destroyed  by  maceration  instead  of  burn- 
ing to  ashes,  as  now  provided  by  law;  and  that  so  much  of 
sections  twenty-four  and  forty-three  of  the  national-cur- 
rency act  as  requires  national  bank  notes  to  be  burned  to 
ashes  is  hereby  repealed ;  that  the  pulp  from  such  macer- 
ated issue  shall  be  disposed  of  only  under  the  direction  of 
the  Secretary  of  the  Treasury. 

Act  June  23,  1874,  c.  455,  §  1,  18  Stat,  206  (Comp.  St.  1901,  p. 
2396). 


ACTS   OF   CONOUESS  477 

This  is  a  pnivision  of  tln>  sundry  civil  approi.'rialion  act  for  the 
fiscal  year  ending  June  3U.   1875,  cited  above. 

The  provisinns  of  the  national  currency  act  mentioned  in  this  par- 
agraph, Act  Juno  3,  ISGl,  c.  lOO,  §^  24,  43.  are  incorporated  in  Kcv. 
St.  §§  5184,  5225.  They  provide  for  the  destruction  by  burning  of 
worn-out  or  mutilated  circulating  bank  notes  and  notes  df^insolvent 
banks. 

ACT  JUNE  30,  1876,  c.  156,  §  5. 

Counterfeit  notes  to  be  marked. — That  all  United  States 
officers  cluirt;c(l  with  the  receipt  or  disbursement  of  public 
moneys,  and  all  officers  of  national  banks,  shall  stamp  or 
write  in  plain  letters  the  word  "counterfeit"  "altered"  or 
"worthless,"  upon  all  fraudulent  notes  issued  in  the  form 
of,  and  intended  to  circulate  as  money,  which  shall  be  pre- 
sented at  their  places  of  business;  and  if  such  officers  shall 
wrongfully  stamp  any  genuine  note  of  the  United  States, 
or  of  the  national  banks,  they  shall,  upon  presentation,  re- 
deem such  notes  at  the  face  value  thereof. 
Act  June  30,  1876,  c.  156,  §  5,  19  Stat.  64. 

This  section  is  part  of  ah  act  relating  to  receiverships  of  national 
banks,  other  sections  of  which  are  set  forth  post,  after  Rev.  St.  § 
523S. 

ACT  AUG.  13,  1894,  c.  281. 

An  Act  to  Subject  to  State  Taxation  National  Bank  Notes 
and  United  States  Treasury  Notes.     (28  Stat.  278.) 

State  taxation  of  national  bank  notes,  etc. — Be  it  enacted, 
&c.,  That  circulating  notes  of  national  banking  associations 
and  United  States  legal  tender  notes  and  other  notes  and 
certificates  of  the  United  States  payable  on  demand  and  cir- 
culating or  intended  to  circulate  as  currency  and  gold,  silver 
or  other  coin  shall  be  subject  to  taxation  as  money  on  hand 
or  on  deposit  under  the  laws  of  any  State  or  Territory: 
Provided,  That  any  such  taxation  shall  be  exercised  in  the 
same  manner  and  at  the  same  rate  that  any  such  State  or 
Territory  shall  tax  money  or  currency  circulating  as  money 
within  its  jurisdiction. 

Act  Aug.  13,  1894,  c.  281,  §  1,  28  Stat.  278. 

Taxation  of  national  banks  not  affected  by  act,^ — Sec.  2. 
That  the  provisions  of  this  Act  shall  not  be  deemed  or  held 
to  change  existing  laws  in  respect  of  the  taxation  of  na- 
tional banking  associations. 

Act  Aug.  13,  1894,  c.  281,  §  2,  28  Stat.  278. 


478 


APPENDIX 


TITLE  LXII   (REVISED   STATUTES).— NA- 
TIONAL BANKS 

Chap.  Sec. 

1.  Organization  and  poicers 5133 

2.  Obtaining  and  issuing  circulating  notes 5157 

3.  Regulation  of  the  banking  business 5190 

4.  Dissolution  and  receivership 5220 


CHAPTER   ONE— ORGANIZATION   AND   POWERS 


Sec. 

5133.  Formation  of  national  banking  as- 

sociations. 
Act  June  20,   1874,    c.   343,    §  1. 
The  "national-bank  act." 

5134.  Requisites   of   organization   certifi- 

cate. 

5135.  How  certificate  shall   be  acknowl- 

edged and  filed. 

5136.  Corporate  powers   of  associations. 
Act  May  1,  1S86,  c.  73. 

1.  [Relates    to     increase    of     capital 

stock.] 

2.  Change  of  name   or  location. 

3.  Effect     of     change     of     name     on 

debts,    liabilities,   etc. 

4.  Liabilities    and    suits    not   affected 

by  change  of  name. 
Act  July  12,  1882.   c.   290. 

1.  Extension    of   period    of   corporate 

succession. 

2.  Procedure. 

3.  Examination   and   issue   of  certifi- 

cate of  approval  by  Comptroller. 

4.  Corporate   powers    upon    extension 

of  period  of  succession;  juris- 
diction of  suits  by  or  against 
national  banks. 

5.  Withdrawal    of    dissenting    share- 

holders. 

6.  Redemption    of    circulating    notes 

issued  prior  to  extension  of  pe- 
riod of  succession. 

7.  Dissolution    of   banks    not   extend- 

ing period  of  succession. 

8.  [Relates  to  bond  deposits  and  cir- 

culating notes.] 

9.  [Relates    to   withdrawal   of   circu- 

lating notes.] 

10.  [Superseded.] 

11.  [Relates  to   exchange   of  bonds.] 

12.  [Relates  to  gold  certificates.] 

13.  [Relates    to    false    certification    of 

checks.] 

14.  Reservation    of    power    to    amend, 

alter,   or  repeal  act. 
Act   April   12,   1902,    c.    503. 


Sec. 

Additional   extension   of   period    of 
corporate    succession. 

5137.  Power  to    hold  real  property. 

5138.  Requisite  amount  of  capital. 
5133.  Shares  of  stock  and  transfers. 

5140.  How  payment  of  the  capital  stock 

must   be  made  and  proved. 

5141.  Proceedings    if    shareholder    fails 

to  pay  installments. 

5142.  Increase   of   capital   stock. 
Act  May  1,  1886,   c.  73,  §  1. 

Increase   of   capital    stock. 

5143.  Reduction   of   capital   stock. 

5144.  Right  of  shareholders  to  vote. 

5145.  Election   of   directors. 

5146.  [As    amended.    Act    Feb.    28,    1905, 

c.  1163.]  Requisite  qualifications 
of   directors. 

5147.  Oath  required  from  directors. 

5148.  Filling  vacancies. 

5149.  Proceedings   where   no   election   is 

held   on    the    proper    day. 

5150.  Election  of  president  of  the  board. 

5151.  Individual    liability    of    sharehold- 

ers. 

5152.  Executors,   trustees,  etc.,  not  per- 
,  sonally  liable. 

5153.  [As   amended.    Act   March   4,    1907, 

c.   2913,    §  3.]     Duties  and  liabil- 
ities when  designated  as  deposi- 
taries of  public  money. 
Act  May  30,   1908,   c.   229. 

14.  Provisions   relating  to  reserves  of 

national  banks  not  to  apply  to 
deposits  of  public  moneys  in 
designated  depositaries. 

15.  Rate    of    interest    on    special    and 

additional  deposits  in  national 
banks  designated  as  deposita- 
ries. 

5154.  Organization     of    State    banks    as 

national  banking  associations. 

5155.  State  banks  having  branches. 

5156.  Reservation    of   rights   of   associa- 

tions organized  under  act  of 
1863. 


ACTS  or  coNoi:i:.s.s  479 

Sec.  5133.     Formation  of  national  banking  associations. 

—Associations  for  carryin^^  on  the  business  of  bankin;;-  un- 
der this  Title  may  be  formed  by  any  number  of  natural 
persons,  not  less  in  any  case  than  five.  They  sjj^jjl  enter 
into  articles  of  association,  which  shall  specify  in  t,^eneral 
terms  the  object  for  which  the  association  is  formed,  and 
may  contain  any  other  provisions,  not  inconsistent  with  law, 
which  the  association  may  see  fit  to  adopt  for  the  regulation 
of  its  business  and  the  conduct  of  its  afifairs.  These  arti- 
cles shall  be  signed  by  the  persons  uniting  to  form  the  as- 
sociation, and  a  copy  of  them  shall  be  forwarded  to  the 
Comptroller  of  the  Currency,  to  be  filed  and  preserved  in 
his  office. 

Act  June  3.  18r>4.  c.  106,  §  5,  13  Stat.  100. 

The  act  entitled  "An  Act  to  Provide  a  National  Currency  Secured 
by  a  Pledge  of  United  States  Bonds,  and  to  Provide  for  the  Circula- 
tion and  Redemption  Thereof,"  Act  June  3,  1SG4,  c.  106.  13  Stat. 
90-118.  constituting  the  greater  part  of  this  Title,  is  designated  as 
the  "national-bank  act"  by  Act  June  20,  1874,  c.  343,  §  1,  set  forth 
below. 

Provisions  relating  to  the  Comptroller  of  the  Currency  are  con- 
tained, ante,  in  Rev.  St.  §§■  324-333. 

National  gold  banks  may  be  converted  into  currency  banks  author- 
ized by  this  section,  by  Act  Feb.  14,  1S80,  c.  25,  post,  following  Rev. 
St.  §  5186. 

ACT  JUNE  20,   1874,  c.  343,  §   1. 

The  "national-bank  act." — Be  it  enacted,  &c.,  That  the 
act  entitled  "An  act  to  provide  a  national  currency  secured 
by  a  pledge  of  United  States  bonds,  and  to  provide  for  the 
circulation  and  redemption  thereof,"  approved  June  third, 
eighteen  hundred  and  sixty-four,  shall  hereafter  be  known 
as  "the  national-bank  act." 

Act  June  20,  1874,  c.  343,  §  1,  IS  Stat.  123. 

This  sectioif  is  part  of  an  act  fixing  the  .iniount  of  United  States 
notes,  providing  for  the  redistriljution  of  the  national  bank  currency, 
etc.  Other  sections  are  set  forth  or  referred  to,  post,  under  Rev. 
St.   §   5192. 

Act  June  .3,  1864,  c.  106.  13  Stat.  09.  mentioned  in  this  section,  is 
incorporated  into  this  Title  of  the  statutes,  constituting  the  greater 
part   thereof. 

Sec.  5134.  Requisites  of  organization  certificate. — The 
persons  uniting  to  form  such  an  association  shall,  under 
their  hands,  make  an  organization  certificate,  which  shall 
specifically  state: 


4S0  APPENDIX 

First.  The  name  assumed  by  such  association ;  which 
name  shall  be  subject  to  the  approval  of  the  Comptroller 
of  the  Currency. 

Second.  The  place  where  its  operations  of  discount  and 
deposit  are  to  be  carried  on,  designating-  the  State,  Terri- 
tory, or  district,  and  the  particular  county  and  city,  town, 
or  village. 

Third.  The  amount  of  capital  stock  and  the  number  of 
shares  into  which  the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of  residence  of  the  share- 
tiolders  and  the  number  of  shares  held  by  each  of  them. 

Fifth.  The  fact  that  the  certificate  is  made  to  enable  such 
persons  to  avail  themselves  of  the  advantages  of  this  Title. 
Act  June  3,  1864.  c.  106,  §  6,  13  Stat.  101. 

Provisions  authorizing  national  banks  to  change  their  names  or  lo- 
cations are  contained  in  Act  May  1,  1SS6,  c.  73,  set  forth  below. 

Sec.  5135.  How  certificate  shall  be  acknowledged  and 
filed. — The  organization  certificate  shall  be  acknowledged 
before  a  judge  of  some  court  of  record,  or  notary  public; 
and  shall  be,  together  with  the  acknowledgment  thereof,  au- 
thenticated by  the  seal  of  such  court,  or  notary,  transmitted 
to  the  Comptroller  of  the  Currency,  who  shall  record  and 
carefully  preserve' the  same  in  his  office. 
Act  June  3,  1864,  c.  106,  §  6,  13  Stat.  101. 

Copies  of  organization  certificates  certified  and  authenticated  by  the 
Comptroller  of  the  Currency  are  evidence  in  all  courts  and  places 
within  the  United  States  of  the  existence  of  the  association,  and  of  all 
matters  which  could  be  proved  by  the  originals,  by  Rev.  St.  §  885, 
ante. 

Sec.  5136.     Corporate     powers     of    associations. — Upon 

duly  making  and  filing  articles  of  association  and  an  or- 
ganization certificate,  the  association  shall  become,  as  from 
the  date  of  the  execution  of  its  organization  certificate,  a 
body  corporate,  and  as  such,  and  in  the  name  designated 
in  the  organization  certificate,  it  shall  have  power — 

First.  To  adopt  and  use  a  corporate  seal. 

Second.  To  have  succession  for  the  period  of  twenty 
years  from  its  organization,  unless  it  is  sooner  dissolved 
according  to  the  provisions  of  its  articles  of  association,  or 
by  the  act  of  its  shareholders  owning  two-thirds  of  its  stock, 
or  unless  its  franchise  becomes  forfeited  by  some  violation 
of  law. 

Third.  To  make  contracts. 


ACTS  OF  CONGRESS  481 

Fourth.  To  sue  and  be  sued,  complain  and  dcTend,  in  any 
court  of  law  and  equity,  as  fulh'  as  natural  persons. 

Fifth.  To  elect  or  appoint  directors,  and  by  its  board  of 
directors  to  appoint  a  president,  vice-president,  cashier,  and 
other  officers,  define  their  duties,  require  bonds  of  them 
and  fix  the  penalty  thereof,  dismiss  such  officers  or  any  of 
them  at  pleasure,  and  appoint  others  to  fill  their  places. 

Sixth.  To  prescribe,  .by  its  board  of  directors,  by-laws 
not  inconsistent  with  law,  regulating  the  manner  in  which 
its  stock  shall  be  transferred,  its  directors  elected  or  ap- 
pointed, its  officers  appointed,  its  property  transferred,  its 
general  business  conducted,  and  the  privileges  granted  to 
it  by  law  exercised  and  enjoyed. 

Seventh.  To  exercise  by  its  board  of  directors,  or  duly 
authorized  officers  or  agents,  subject  to  law,  all  such  in- 
cidental powers  as  shall  be  necessary  to  carry  on  the  busi- 
ness of  banking;  by  discounting  and  negotiating  promis- 
sory notes,  drafts,  bills  of  exchange,  and  other  evidences  of 
debt;  by  receiving  deposits;  by  buying  and  selling  ex- 
change, coin,  and  bullion  ;  by  loanino-  money  on  personal 
security;  and  by  obtaining,  issuing,  and  circulating  notes 
according  to  the  provisions  of  this  Title. 

But  no  association  shall  transact  any  business  except 
such  as. is  incidental  and  necessarily  preliminary  to  its  or- 
ganization, until  it  has  been  authorized  by  the  Comptroller 
of  the  Currency  to  commence  the  business  of  banking. 

Act  Juue  3,  1864,  c.  106,  §  8,  13  Stat.  101. 

Provisions  relating  to  tlie  extension  of  corporate  succession  are  con- 
tained in  Act  July  12,  18S2,  c.  290,  set  forth  below. 

ACT  MAY    1,    1886,  c.  73. 

An  Act  to  Enable  National  BanTving  Associations  to  In- 
crease their  Capital  Stock'and  to  Change  their  Names 
.      or  Locations  (24  Stat.  18).- 

Be  it  enacted,  etc.,  [Sec.  1.  Relates  to  increase  of  capi- 
tal stock.] 

This  section  authorizes  the  increase  of  capital  stock,  and  is  set  forth 
post,  following  Rev.  St.  §  5142. 

Change  of  name  or  location. — Sec.  2.  That  any  national 
banking  association  may  change  its  name  or  the  place 
where  its  operations  of  discount  and  deposit  are  to  be  car- 
ried on,  to  any  other  place  within  the  same  State,  not  more 
than  thirty  miles  distant  with  the  approval  of  the  Comptrol- 
Tiff.Bks.&  B.— 31 


482  APPENDIX 

ler  of  the  Cvirrency,  by  the  vote  of  shareholders  owning 
two-thirds  of  the  stock  of  such  association.  A  duly  authen- 
ticated notice  of  the  vote  and  of  the  new  name  or  location 
selected  shall  be  sent  to  the  office  of  the  Comptroller  of  the 
Currency;  but  no  change  of  name  or  location  shall  be  valid 
until  the  Comptroller  shall  have  issued  his  certificate  of 
approval  of  the  same. 

Act  May  1,  18S6,  c.   73,  §  2,  24  Stat.  IS. 

Effect  of  change  of  name  on  debts,  liabilities,  etc. — Sec. 
3.     That  all  debts,  liabilities,  rights,  provisions,  and  pow- 
ers of  the  association  under  its  old  name  shall  devolve  upon 
and  inure  to  the  association  under  its  new  name. 
Act  May  1,   1SS6,  c.   73,  §  3,   24   Stat.  19. 

Liabilities  and 'suits  not  affected  by  change  of  name. — 
Sec.  4.  That  nothing  in  this  act  contained  shall  be  so  con- 
strued as  in  any  manner  to  release  any  national  banking 
association  under  its  old  name  or  at  its  old  location  from 
any  liability,  or  affect  any  action  or  proceeding  in  law  in 
which  said  association  may  be  or  become  a  party  or  inter- 
ested. 

Act  May  1,  ISSG,  c.  73,  §  4,  24  Stat.  19. 

ACT  JULY  12,  1882,  c.  290. 

An  Act  to  Enable  National-Banking  Associations  to  Ex- 
tend their  Corporate  Existence,  and  for  Other  Pur- 
poses.    (22  Stat.  162.) 

Extension  of  period  of  corporate  succession. — Be  it  en- 
acted, &:c.,  That  any  national  banking  association  organized 
under  the  acts  of  February  twenty-fifth,  eighteen  hundred 
and  sixty-three,  June  third  eighteen  hundred  and  sixty- 
four,  and  February  fourteent?h,  eighteen  hundred  and  eighty, 
or  under  sections  fifty-one  hundred  and  thirty-three,  fifty- 
one  hundred  and  thirty-four,  fifty-one  hundred  and  thirty- 
five,  fifty-one  hundred  and  thirty-six,  and  fifty-one  hundred 
fifty-four  of  the  Revised  Statutes  of  the  United  States,  may, 
at  any  time  within  the  two  years  next  previous  to  the  date 
of  the  expiration  of  its  corporate  existence  under  present 
law,  and  with  the  approval  of  the  Comptroller  of  the  Cur- 
rency, to  be  granted,  as  hereinafter  provided,  extend  its 
period  of  succession  by  amending  its  articles  of  association 
for  a  term  of  not  more  than  twenty  years  from  the  expi- 
ration  of   the   period   of   succession   named   in    said   articles 


ACTS   OF   CONfJItKSS  4S;{ 

of  association,  and  shall  liave  succession  for  such  extended 
period,  unless  sooner  dissolved  by  the  act  of  shareholders 
owning  two-thirds  of  its  stock,  or  unless  its  franchise  be- 
comes forfeited  by  some  violation  of  law,  or  unless  here- 
after modified  or  repealed.  '*"' 

Act  July   12,   1S.S2,   c.   2!)0.  §   1.   22  Stat.   102. 

Act  Feb.  25.  ISOo,  c.  HS,  12  Stat.  OC"),  montioiiod  in  this  section,  is 
repealed  by  Act  June  3.  1S04.  c.  100,  1.3  Stat.  !)'.).  also  m.-ntioued 
therein,  which_  is  incorporated  into  Itcv.  St.  §J  5133-5243.  Act  Feb. 
14,  ISSO.  c.  25,  also  mentioned  in  this  section,  is  set  forth  post,  fol- 
lowing Rev.  St.  §  51SG. 

The  Comptroller  of  the  Currency  is  authorized  to  extend,  under 
the  provisions  of  this  act,  for  a  further  period  of  20  years,  the  charter 
of  any  national  banking  association  extended  under  the  provisions  of 
this  act,  by  Act  April  12,  1902,  c.  503.  set  forth  below. 

Procedure. — Sec.  2.  That  such  amendment  of  said  arti- 
cles of  association  shall  be  authorized  by  the  consent  in 
writing  of  shareholders  owning  not  less  than  two-thirds 
of  the  capital  stock  of  the  association ;  and  the  board  of  di- 
rectors shall  cause  such  consent  to  be  certified  under  the 
seal  of  the  association,  by  the  president  or  cashier,  to  the 
Comptroller  of  the  Currency,  accompanied  by  an  apj)lica- 
tion  made  by  the  president  or  cashier  for  the  approval  of 
the  amended  articles  of  association  by  the  Comptroller ; 
and  such  amended  articles  of  association  shall  not  be  valid 
until  the  Comptroller  shall  give  to  such  association  a  cer- 
tificate under  his  hand  and  seal  that  the  association  has 
complied  with  all  the  provisions  required  to  be  complied 
with,  and  is  authorized  to  have  succession  for  the  extended 
period  named  in  the  amended  articles  of  association. 

Act  July  12,   1SS2,  c.  200,  §  2,  22  Stat.   1G2. 

Examination  and  issue  of  certificate  of  approval  by  Comp- 
troller.— Sec.  3.  That  upon  the  receipt  of  the  application 
and  certificate  of  the  association  provided  for  in  the  pre- 
ceding section,  the  Comptroller  of  the  Currency  shall  cause 
a-special  examination  to  be  made,  at  the  expense  of  the  as- 
sociation, to  determine  its  condition ;  and  if  after  such  ex- 
amination or  otherwise,  it  appears  to  him  that  said  asso- 
ciation is  in  a  satisfactory  condition,  he  shall  grant  his 
certificate  of  approval  provided  for  in  the  preceding  section, 
or  if  it  appears  that  the  condition  of  said  association  is  not 
satisfactory,  he  shall  withhold  such  certificate  of  approval. 

Act  July  12,  1882,  c.  290,  §  3,  22  Stat.  1G3. 


484  APrENDix 

Corporate  powers  upon  extension  of  period  of  succession; 
jurisdiction  of  suits  by  or  against  national  banks. — Sec.  4. 
That  any  association  so  extending  the  period  of  its  succes- 
sion shall  continue  to  enjoy  all  the  rights  and  privileges  and 
immunities  granted  and  shall  continue  to  be  subject  to  all 
the  duties,  liabilities,  and  restrictions  imposed  by  the  Re- 
vised Statutes  of  the  United  States  and~  other  acts  having 
reference  to  national  banking  associations,  and  it  shall  con- 
tinue to  be  in  all  respects  the  identical  association  it  was 
before  the  extension  of  its  period  of  succession :  Provided, 
however,  That  the  jurisdiction  for  suits  hereafter  brought 
by  or  against  any  association  established  under  any  law 
providing  for  national-banking  associations,  except  suits 
between  them  and  the  United  States,  or  its  officers  and 
agents,  shall  be  the  same  as,  and  not  other  than,  the  juris- 
diction for  suits  by  or  against  banks  not  organized  under 
any  law  of  the  United  States  which  do  or  might  do  banking 
business  where  such  national-banking  association  may  be 
doing  business  when  such  suits  may  be  begun :  And  all 
laws  and  parts  of  laws  of  the  United  States  inconsistent 
with  this  proviso  be,  and  the  same  are  hereby,  repealed. 
Act  July  12.  1SS2,  c.  290.  §  4.  22  Stat.   1G.3. 

Provisions  relating  to  the  citizenship  of  national  banks  for  ])ur- 
poses  of  actions  by  or  against  them,  and  to  the  jurisdiction  of  the 
district  courts,  are  contained  in  Act  March  3,  1911,  c.  231,  §  24  (16), 
ante. 

Withdrawal  of  dissenting  shareholders. — Sec.  5.  That 
when  any  national-banking  association  has  amended  its 
articles  of  association  as  provided  in  this  act,  and  the  Comp- 
troller has  granted  his  certificate  of  approval,  any  share- 
holder not  assenting  to  such  amendment  may  give  notice 
in  writing  to  the  directors,  within  thirty  days  from  the  date 
of  the  certificate  of  approval,  of  his  desire  to  withdraw  from 
said  association,  in  which  case  he  shall  be  entitled  to  re- 
ceive from  said  banking  association  the  value  of  the  shares 
so  held  by  him,  to  be  ascertained  by  an  appraisal  made 
by  a  committee  of  three  persons,  one  to  be  selected  by  such 
shareholder,  one  by  the  directors,  and  the  third  by  the  first 
two ;  and  in  case  the  value  so  fixed  shall  not  be  satisfactory 
to  any  such  shareholder,  he  may  appeal  to  the  Comptroller 
of  the  Currency,  who  shall  cause  a  reappraisal  to  be  made, 
which  shall  l)e  final  and  binding;  and  if  said  reappraisal 
shall  exceed  the  value  fixed  by  said  committee,  the  bank 


ACTS   OF   CONOIIKSS  485 

shall  pay  the  expenses  of  said  reappraisal,  and  otherwise 
the  appellant  shall  pay  said  expenses ;  and  the  value  so  as- 
certained and  determined  shall  be  deemed  to  be  a  debt  flue, 
and  be  forthwith  paid,  to  said  shareholder  from  SSti^  bank  ; 
and  the  shares  so  surrendered  and  appraised  shall,  after  due 
notice,  be  sold  at  public  sale,  within  thirty  days  after  the 
final  appraisal  provided  in  this  section  :  Provided,  '^I'hat  in 
the  organization  of  any  banking  association  intended  to 
replace  any  existing  banking  association,  and  retaining  the 
name  thereof,  the  holders  of  stock  in  the  expiring  associa- 
tion shall  be  entitled  to  preference  in  the  allotment  of  the 
shares  of  the  new  association  in  proportion  to  the  number 
of  shares  held  by  them  respectively  in  the  expiring  associa- 
tion. 

Act  July  12,  18S2,  c.  290,  §  5.  22  Stat.  163. 

Redemption  of  circulating  notes  issued  prior  to  extension 
of  period  of  succession. — Sec.  6.  That  the  circulating  notes 
of  any  association  so  extending  the  period  of  its  succession 
which  shall  have  been  issued  to  it  prior  to  such  extension 
shall  be  redeemed  at  the  Treasury  of  the  United  States, 
as  provided  in  section  three  of  the  act  of  June  twentieth, 
eighteen  hundred  and  seventy-four,  entitled  "An  act  fixing 
the  amount  of  United  States  notes,  providing  for  redistribu- 
tion of  national-]:)ank  currency,  and  for  other  purposes," 
and  such  notes  when  redeemed  shall  be  forwarded  to  the 
Comptroller  of  the  Currency,  and  destroyed  as  now  pro- 
vided by  law;  and  at  the  end  of  three  years  from  the  date 
of  the  extension  of  the  corporate  existence  of  each  bank  the 
association  so  extended  shall  deposit  lawful  money  with 
the  Treasurer  of  the  United  States  sufficient  to  redeem  the 
remainder  of  the  circulation  which  was  outstanding  at  the 
date  of  its  extension,  as  provided  in  sections  fifty-two  hun- 
dred and  twent3--two,  fifty-two  hundred  and  twenty-four, 
and  fifty-two  hundred  and  twenty-five  of  the  Revised  >Stat- 
utes ;  and  any  gain  that  may  arise  from  the  failure  to  pre- 
sent such  circulating  notes  for  redemption  shall  inure  to 
the  benefit  of  the  United  States;  and  from  time  to  time,  as 
such  notes  are  redeemed  or  lawful  money  deposited  there- 
for as  provided  herein,  new  circulating  notes  shall  l)e  is- 
sued as  provided  by  this  act,  bearing  such  devices,  to  be 
approved  by  the  Secretary  of  the  Treasury,  as  shall  make 
them    readily    distinguishable    from    the    circulating    notes 


48G  APPENDIX 

heretofore  issued:  Provided,  however,  That  each  banking 
association  which  shall  obtain  the  benefit  of  this  act  shall 
reimburse  to  the  Treasury  the  cost  of  preparing  the  plate  or 
plates  for  such  new  circulating  notes  as  shall  be  issued  to  it. 
Act  July  12,  1882,  c.  290,  §  6,  22  Stat.  163. 

Act  June  20.  1874,  c.  343,  §  3,  mentioned  in  this  section,  relates  to 
the  redemption  of  circulating -notes,  and  is  set  forth  post,  following 
Rev.  St.  §  5192. 

The  method  of  destroying  bank  notes  by  burning,  as  provided  in  Rev. 
St.  §§  5184,  5225.  is  superseded  by  Act  June  23,  1874,  c.  455,  §  1 
(Comp.  St.  1901,  p.  2.396),  ante,  which  requires  all  bank  notes,  etc., 
to  be  macerated  instead  of  burned. 

Dissolution  of  banks  not  extending  period  of  succession. 
— Sec.  7.  That  national-banking  associations  whose  cor- 
porate existence  has  expired  or  shall  hereafter  expire,  and 
which  do  not  avail  themselves  of  the  provisions  of  this  act, 
shall  be  required  to  comply  with  the  provisions  of  sections 
fifty-two  hundred  and  twenty-one  and  fifty-two  hundred 
and  twenty-two  of  the  Revised  Statutes  in  the  same  man- 
ner as  if  the  shareholders  had  voted  to  go  into  liquidation, 
as  provided  in  section  fifty-two  hundred  and  twenty  of  the 
Revised  Statutes;  and  the  provisions  of  sections  fifty-two 
hundred  and  twenty-four  and  fifty-two  hundred  and  twenty- 
five  of  the  Revised  Statutes  shall  also  be  applicable  to  such 
associations,  except  as  modified  by  this  act ;  and  the  fran- 
chise of  such  association  is  hereby  extended  for  the  sole 
purpose  of  liquidating  their  affairs  until  such  afifairs  are 
finally  closed. 

Act  July  12,  1SS2,  c.  290,  §  7,  22  Stat.  164. 

Sec.  8.     [Relates  to  bond  deposits  and  circulating  notes.] 
This   section  relates   to   the  bond  deposits   and  circulating  notes   of 
certain  banks,  and  is  set  forth  post,  following  Rev.  St.  §  5167. 

Sec.  9.      [Relates  to  withdrawal  of  circulating  notes.] 
This  section  relates  to  the  deposit  of  "lawful  money"  and  the  with- 
drawal of  circulating  notes,  and  is  set  forth  post,  following  Rev.  St. 
§  5167. 

Sec.  10.     [Superseded.    Act  March  14,  1900,  c.  41,  §  12.] 

This   section  repealed  Rev.  St.   §§   5171,   5176,   and   prescribed   and 

regulated   the    issue   of   circulating   notes.      It   is    superseded   by   Act 

March   14,  1900,  c.   41,   §   12,  post,   following  Rev.   St.   §   5171.'    See, 

also,  note  under  that  section. 

Sec.  11.      [Relates  to  exchange  of  bonds.] 
This   section  provides  for   the   exchange,   for   outstanding   three   and 
one-half   per   cent,    bonds   of   the    United    States,    of   three    per   cent. 


ACTS   OF   CONCUESS  487 

bonds,   and  is  set   forth  Comp.   St.   1001,   p.  2478,   following   Rev.   St. 

§  3;;5»7. 

Sec.  12.     [Relates  to  gold  certificates.]  ^^ 

This  section  authorizes  the  issue  of  gold  certificates  upon  the  de- 
posit of  gold  coin,  and  is  set  forth  Comp,  St.  lUOl.  n.  140.  follow- 
ing Rev.  St.  §  2u4. 

Sec.  13.     [Relates  to  false  certification  of  checks.] 
This  section  provides  for  the  punishment  of  bank  oiBccrs,  etc.,  for 
falsely   certifying   checks,    and    is   set    forth    post,   following   Rev.    St. 
§  520S. 

Reservation  of  power  to  amend,  alter  or  repeal  act. — Sec. 
14.     That  Congress  may  at  any  time  amend,  alter,  or  repeal 
this  act  and  the  acts  of  which  this  is  amendatory. 
Act  July  12,  18S2,  c.  200,  §  14,  22  Stat.  IGG. 

ACT  APRIL  12,  1902,  c.  50?. 

An  Act  to  Provide  for  the  Extension  of  the  Charters  of 
National  Banks.     (32  Stat.  102.) 

Additional  extension  of  period  of  corporate  succession. — 
Be  it  enacted,  &c.,  That  the  Comptroller  of  the  Currency  is 
hereby  authorized,  in  the  manner  provided  by,  and  under 
the  conditions  and  limitations  of,  the  Act  of  July  twelfth, 
eighteen  hundred  and  eighty-two,  to  extend  for  a  further 
period  of  twenty  years  the  charter  of  any  national  banking 
association  extended  under  said  Act  wh'ich  shall  desire  to 
continue  its  existence   after  the   expiration  of  its  charter. 

Act  April  12,  1002.  c.  503.  .32  Stat.  102. 

Act  July  12,  1882,  c.  200.  mentioned  in  this  act,  is  set  forth  above. 

Sec.  5137.  Power  to  hold  real  property. — A  national 
banking  association  may  purchase,  hold,  and  convey  real 
estate  for  the  following  purposes,  and  for  no  others:' 

First.  Such  as  shall  be  necessary  for  its  immediate  ac- 
commodation in  the  transaction  of  its  business.  . 

Second.  Such  as  shall  be  mortgaged  to  it  in  good  faith 
by  way  of  security  for  debts  previously  contracted. 

Third.  Such  as  shall  be  conveyed  to  it  in  satisfaction  of 
debts  previously  contracted  in  the  course  of  its  dealings. 

Fourth.  Such  as  it  shall  purchase  at  sales  under  judg- 
ments, decrees,  or  mortgages  held  by  the  association,  or 
shall  purchase  to  secure  debts  due  to  it. 

But  no  such  association  shall  hold  the  possession  of  any 
real  estate  under  mortgage,  or  the  title  and  possession  of 


488  APPENDIX 

any  real  estate  purchased  to  secure  any  debts  due  to  it,  for 
a  longer  period  then  five  years. 

Act  June  3,  1864,  c.  106,  §  28,  13  Stat.  107. 

Sec.  5138.  [As  amended  1900.]  Requisite  amount  of 
capital. — No  association  shall  be  organized  with  a  less  cap- 
ital than  one  hundred  thousand  dollars,  except  that  banks 
with  a  capital  of  not  less  than  fifty  thousand  dollars  may, 
with  the  approval  of  the  Secretary  of  the  Treasury,  be  or- 
ganized in  any  place  the  population  of  which  does  not  ex- 
ceed six  thousand  inhabitants,  and  exc-ept  that  banks  with 
a  capital  of  not  less  than  twenty-five  thousand  dollars  may, 
with  the  sanction  of  the  Secretary  of  the  Treasury,  be  or- 
ganized in  any  place  the  population  of  which  does  not  ex- 
ceed three  thousand  inhabitants.  No  association  shall  be 
organized  in  a  city  the  population  of  which  exceeds  fifty 
thousand  persons  with  a  capital  of  less  than  two  hundred 
thousand  dollars. 

Act  June  3.  1864.  c.  106,  §-  7,  13  Stat.  101.     Act  March  14,  1900. 

c.  41,   §  10,   31   Stat.  48. 
This  section  is  amended  by  Act  March  14.  1900.   c.  41,  §  10,  cited 

above,    by    adding,    after    the   words    "six    thousand    inhabitants,'"    the 

clause  beginning  with  the  words  "and  except  that  banks,"  and  ending 

with   the  words  "three   thousand  inhabitants." 

Sec.  5139.  Shares  of  stock  and  transfers. — The  capital 
stock  of  each  association  shall  be  divided  into  shares  of 
one  hundred  dollars  each,  and  be  deemed  personal  prop- 
erty, and  transferable  on  the  books  of  the  association  in 
such  manner  as  may  be  prescribed  in  the  by-laws  or  arti- 
cles of  association.  Every  person  becoming  a  shareholder 
by  such  transfer  shall,  in  proportion  to  his  shares,  succeed 
to  all  the  rights  and  liabilities  of  the  prior  holder  of  such 
shares ;  and  no  change  shall  be  made  in  the  articles  of  as- 
sociation by  which  the  rights,  remedies,  or  security  of  the 
existing  creditors  of  the  association  shall  be  impaired. 
Act  June  3,  1S64,  c.  106,  §  12.  13  Stat,  102. 

Sec.  5140.  How  payment  of  the  capital  stock  must  be 
made  and  proved. — At  least  fifty  per  centum  of  the  capital 
stock  of  every  association  shall  be  paid  in  before  it  shall 
be  authorized  to  commence  business ;  and  the  remainder  o^ 
the  capital  stock  of  such  association  shall  be  paid  in  install- 
ments of  at  least  ten  per  centum  each,  on  the  whole  amount 
of  the"  capital,  as  frequently  as  one  installment  at  the  end 


ACTS  OF  coN<;iu:ss  4v'<'J 

of  each  succeeding  month  from  the  time  it  shall  be  author- 
ized by  the  Comptroller  of  the  Currency  to  commence  busi- 
ness; and  the  payment  of  each  installment  shall  be  certi- 
fied to  the  Comptroller,  under  oath,  by  the  prijsidcnt  or 
cashier  of  the  association. 

Aft  June  3.  1SG4.  c.  lOG,  §  14.  Hi  Stat.  103. 

Sec.  5141.  Proceedings  if  shareholder  fails  to  pay  in- 
stallments.— Whenever  any  shareholder,  or  his  assignee, 
fails  to  pay  any  installinent  on  the  stock  when  the  same  is 
required  by  the  preceding  section  to  be  paid,  the  directors 
of  such  association  may  sell  the  stock  of  such  delinquent 
shareholder  at  public  auction,  having  given  three  w^eeks' 
previous  notice  thereof  in  a  newspaper  published  and  of 
general  circulation  in  the  city  or  county  where  the  asso- 
ciation is  located,  or  if  no  newspaper  is  published  in  said 
city  or  county,  then  in  a  newspaper  published  nearest  there- 
to, to  anv  person  who  will  pay  the  highest  price  therefor, 
to  be  not  less  than  the  amount  then  due  thereon,  with  the 
expenses  of  advertisement  and  sale;  and  the  excess,  if  any, 
shall  be  paid  to  the  delinquent  shareholder.  '  If  no  bidder 
can  be  found  who  will  pay  for  such  stock  the  amount  due 
thereon  to  the  association,  and  the  cost  of  advertisement 
and  sale,  the  amount  previously  paid  shall  be  forfeited  to 
the  association,  and  such  stock  shall  be  sold  as  the  directors 
mav  order,  within  six  months  from  the  tiriTe  of  such  for- 
feiture, and  if  not  sold  it  shall  be  canceled  and  deducted 
from  the  capital  stock  of  the  association.  If  any  such  can- 
cellation and  reduction  shall  reduce  the  capital  of  the  as- 
sociation below  the  minimum  of  capital  required  by  law, 
the  capital  stock  shall,  within  thirty  days  from  the  date  of 
such  cancellation,  be  increased  to  the  required  amount ;  in 
default  of  which  a  receiver  may  be  appointed,  according  to 
the  provisions  of  section  fifty-two  hundred  and  thirty-four, 
to  close  up  the  business  of  the  association. 
Act  June  3,  1864,  c.  106,  §  15,  13  Stat.  103. 

Sec.  5142.  Increase  of  capital  stock. — Any  association 
formed  under  this  Title  may,  by  its  articles  of  association, 
provide  for  an  increase  of  its  capital  from  time  to  time,  as 
may  be  deemed  expedient,  subject  to  the  limitations  of  this 
Title.  But  the  maximum  of  such  increase  to  be  provided 
in  the  articles  of  association  shall  be  determined  by  the 
Comptroller  of  the  Currency;    and  no  increase  of  capital 


490  APPENDIX 

shall  be  valid  until  the  whole  amount  of  such  increase  is 
paid  in.  and  notice  thereof  has  been  transmitted  to  the 
Comptroller  of  the  Currency,  and  his  certificate  obtained 
specifying  the  amount  of  such  increase  of  capital  stock, 
with  his  approval  thereof,  and  that  it  has  been  duly  paid 
in  as  part  of  the  capital  of  such  association. 

Act  June  3,  1864,  c.  106,  §  13,  13  Stat.  103. 

Other  provisions  for  the  increase  of  capital  stock  are  contained  in 
Act  May  1,  1SS6,  c.  73,  §  1,  set  forth  below. 

ACT  MAY  1,  1886,  c.  73,   §   1. 

Increase  of  capital  stock. — That  any  national  banking  as- 
sociation may,  with  the  approval  of  the  Comptroller  of  the 
Currency,  by  the  vote  of  shareholders  owning  two-thirds 
of  the  stock  of  such  association,  increase  its  capital  stock, 
in  accordance  with  existing  laws,  to  any  sum  approved  by 
the  said  Comptroller,  notwithstanding  the  limit  fixed  in 
its  original  articles  of  association  and  determined  by  said 
Comptroller;  and  no  increase  of  the  capital  stock  of  any  na- 
tional banking  association  either  within  or  beyond  the  limit 
fixed  in  its  original  articles  of  association  shall  be  made 
except  in  the  manner  herein  provided. 
Act  May  1,  1886,  c.  73,  §  1,  24  Stat.  IS. 
This  section  is  part  of  an  act  to  enable  national  banks  to  increase 

their  capital  stock,  etc.,   other  sections  of  which  are  set  forth  ante, 

following  Rev.  St.  §  5136. 

Sec.  5143.  Reduction  of  capital  stock. — x\ny  association 
formed  under  this  Title  may,  by  the  vote  of  shareholders 
owning  two-thirds  of  its  capital  stock,  reduce  its  capital  to 
any  sum  not  below  the  amount  required  by  this  Title  to 
authorize  the  formation  of  associations ;  but  no  such  reduc- 
tion shall  be  allowable  which  will  reduce  the  capital  of  the 
association  below  the  amount  required  for  its  outstanding 
circulation,  nor  shall  any  such  reduction  be  made  until  the 
amount  of  the  proposed  reduction  has  been  reported  to  the 
Comptroller  of  the  Curreiicy  and  his  approval  thereof  ob- 
tained. 

Act  June  3,  1864,  c.  106,  §  13,  13  Stat.  103. 

Sec.  5144.  Right  of  shareholders  to  vote. — In  all  elec- 
tions of  directors,  and  in  deciding  all  questions  at  meet- 
ings of  shareholders,  each  shareholder  shall  be  entitled  to 
one  vote  on  each  share  of  stock  held  by  him.  Shareholders 
may  vote  by  proxies  duly  authorized  in  writing;    but  no 


ACTS   OF    COMiKl.SS  4:il 

officer,  clerk,  teller,  or  book-kee])er  of  such  association  sliall 
act  as  proxy  ;  and  no  shareholder  whose  liability  is  past 
due  and  unpaid  shall  be  allowed  to  vote. 

Act  June  3,  1SG4,  c.  100,  §  11,  1,",  Stat.  102.  -*-* 

Sec.  5145.  Election  of  directors. — The  affairs  of  each  as- 
sociation shall  be  managed  by  not  less  than  five  directors, 
who  shall  be  elected  by  the  shareholders  at  a  meeting  to 
be  held  at  any  time  before  the  association  is  authorized 
by  the  Comptroller  of  the  Currency  to  commence  the  busi- 
ness of  banking;  and  afterward  at  meetings  to  be  held  on 
such  day  in  January  of  each  year  as  is  specified  therefor  in 
the  articles  of  association.  The  directors  shall  hold  office 
for  one  year,  and  until  their  successors  are  elected  and  have 
qualified. 

Act  June  3,  1864,  c.  100,  §§  9,  10,  13  Stat.  102. 

Sec.  5146.     [Amended.    Act  Feb.  28,  1905,  c.  1163.] 

This  section  is  amended  by  Act  Feb.  2S,  1905,  c.  1163,  to  read  as 
set  forth  below. 

ACT  FEB.   28,    1905,   c.    1163.     [S.  7005.1 

An  Act  to  Amend  Section  Fifty-One  Hundred  and  Forty- 
Six  of  the  Revised  Statutes  of  the  United  States  in 
Relation  to  the  Qualifications  of  Directors  of  National 
Banking  Associations.     (33  Stat.  818.) 

Amendment  of  Rev.  St,  §  5146.— Be  it  enacted,  &c..  That 
section  fifty-one  hundred  and  forty-six  of  the  Revised  Stat- 
utes of  the  United  States  be  so  amended  as  to  read  as  fol- 
lows : 

Requisite  qualifications  of  directors. — Sec.  5146.  Every 
director  must,  during  his  whole  term  of  service,  be  a  citizen 
of  the  United  States,  and  at  least  three-fourths  of  the  direct- 
ors must  have  resided  in  the  State,  Territory,  or  District 
in  which  the  association  is  located  for  at  least  one  year 
immediately  preceding  their  election  and  \nust  be  residents 
therein  during  their  continuance  in  office.  Every  director 
must  own  in  his  own  right  at  least  ten  shares  of  the  cap- 
ital stock  of  the  association  of  which  he  is  a  director,  un- 
less the  capital  of  the  bank"  shall  not  exceed  twenty-five 
thousand  dollars,  in  which  case  he  must  own  in  his  own 
right  at  least  five  shares  of  such  capital  stock.  Any  direc- 
tor who  ceases  to  be  the  owner  of  the  required  number  of 


492  APPENDIX 

shares  of  the  stock,  or  who  becomes  in  any  other  manner 

disqualified,  shall  thereby  vacate  his  place. 
\ct  Feb.  28.  1905,  c.   llt>3,  33  Stat.  818. 

Kev.  St.  §  5146  (Act  J^uae  3,  1864,  c.  106,  §§  9,  10,  13  Stat.  102), 
amended  by  this  act,  is  set  forth  in  Comp.  St.  1901,  p.  3463.  The 
amendment  consists  in  the  addition,  at  the  end  of  the  second  sentence 
of  the  section  as  originally  enacted,  "Every  director  must  own  m 
his  own  right  at  least  ten  shares  of  the  capital  stock  of  the  associa- 
tion of  which  he  is  a  director,"  of  the  words,  "unless  the  capital 
of  the  bank  shall  not  exceed  twenty-five  thousand  duUars,  in  which 
case  he  must  own  in  his  own  right  at  least  five  shares  of  such  capital 
stock";  and  in  the  insertion,  in  the  last  sentence,  after  the  words, 
"Any  director  who  ceases  to  be  the  owner  of,"  instead  of  the  word 
"ten,"  of  the  words  "the  required  number  of,"  as  set  forth  here. 

Sec.  5147.  Oath  required  from  directors.— Each  director, 
when  appointed  or  elected,  shall  take  an  oath  that  he  will, 
so  far  as  the  duty  devolves  on  him,  diligently  and  hon- 
estly administer  the  affairs  of  such  association,  and  will 
not' knowingly  violate,  or  willingly  permit  to  be  violated, 
any  of  the  pro'visions  of  this  Title,  and  that  he  is  the  owner 
in  good  faith,  and  in  his,  own  right,  of  the  number  of  shares 
of  stock  required  by  this  Title,  subscribed  by  him,  or  stand- 
ing in  his  name  on  the  books  of  the  association,  and  that 
the  .same  is  not  hypothecated,  or  in  any  way  pledged,  as 
security  for  any  loan  or  debt.  Such  oath,  subscribed  by 
the  director  making  it,  and  certified  by  the  officer  before 
whom  it  is  taken,  shall  be  immediately  transmitted  to  the 
Comptroller  of  the  Currency,  and  shall  be  filed  and  pre- 
served in  his  Office. 

Act  June  3,  1864,  c.  106,  §  9,  13  Stat.  102. 

Sec.  5148,  Filling  vacancies.-^Any  vacancy  in  the  board 
shall  be  filled  by  appointment  by  the  remaining  directors, 
and  any  director  so  appointed  shall  hold  his  place  until  the 
next  election. 

Act  June  3,  1864,  c.  106,  §   10,  13  Stat.  102. 

Sec.  5149.  Pr'oceedings  where  no  election  is  held  on  the 
proper  day. — If,  from  any  cause,  an  election  of  directors  is 
not  made  at  the  time  appointed,  the  association  shall  not  for 
that  cause  be  dissolved,  but  an  election  may  be  held  on  any 
subsequent  day,  thirty  days'  notice  thereof  in  all  cases  hav- 
ing been  given  in  a  newspaper  published  in  the  city,  town, 
or  county  in  which  the  association  is  located ;  and  if  no 
newspaper  is  published  in  such  city,  town,  or  county,  such 


ACTS   OF   CONCKKSS  493 

notice  shall  be  published  in  a  newspaper  published  nearest 
thereto.  If  the  articles  of  association  d(j  not  fix  the  day 
on  which  the  election  shall  be  held,  or  if  no  electicm  is  held 
on  the  day  fixed,  the  day  for  the  election  shall  be  desig- 
nated by  the  board  of  directors  in  their  by-laws,  or  other- 
wise; or  if  the  directors  fail  to  fix  the  day,  shareholders 
representing  two-thirds  of  the  shares  may  do  so. 
Act  June  3.  1SG4,  c.  lOG,  §  10,  13  Stat.  lO'J. 

Sec.  5150.     Election  of  president  of  the  board. — One  of 

the  directors,  to  be  chosen  by  the  board,  shall  be  the  pres- 
ident of  the  board. 

Act  June  3.   1S64,  c.  lOG,   §  9,   13  Stat.   102. 

Sec.  5151.     Individual     liability     of     shareholders. — The 

shareholders  of  every  national  ])anking  association  shall  be 
held  individually  responsible,  equally  and  ratably,  and  not 
one  for  another,  for  all  contracts,  debts,  and  engagements 
of  such  association,  to  the  extent  of  the  amount  of  their 
stock  therein,  at  the  par  value  thereof,  in  addition  to  the 
amount  invested  in  such  shares;  except  that  shareholders 
of  any  banking  association  now  existing  under  State  laws, 
having  not  less  than  five  millions  of  dollars  of  capital  actu- 
ally paid  in,  and  a  surplus  of  twenty  per  centum  on  hand, 
both  to  be  determined  by  the  Comptroller  of  the  Currency, 
shall  be  liable  only  to  the  amount  invested  in  their  shares ; 
and  such  surplus  of  twenty  per  centum  shall  be  kept  un- 
diminished, and  be  in  addition  to  the  surplus  provided  for 
in  this  Title  ;  and  if  at  any  time  there  is  a  deficiency  in  such 
surplus  of  twenty  per  centum,  such  association  shall  not 
pay  any  dividends  to  its  shareholders  until  the  deficiency  is 
made  good ;  and  in  case  of  such  deficiency,  the  Comptroller 
of  the  Currency  may  compel  the  association  to  close  its 
business  and  wind  up  its  affairs  under  the  provisions  of 
Chapter  four  of  this  Title. 

Aft  June  3.  1S(!4.  c.  100,  §  12,  13  Stat.  102. 

The  enfoi-cemout  of  the  liability  prescribed  bj-  this  section  by  a  cred- 
itors' bill  or  bill  in  equity  in  cases  of  voluntary  liquidation  under  Kev. 
St.  §  5220.  is  authorized  by  Act  .Tune  30,  1.S76,  c.  156,  §,  2.  set  forth 
post,  following  Rev.  St.  §  .5238. 

Sec.  5152.  Executors,  trustees,  etc.,  not  personally  lia- 
ble.— Persons  holding  stock  as  executors,  administrators, 
guardians,  or  trustees,  shall  not  be  personally  subject  to  any 
liabilities   as   stockholders;    but   the   estates   and   funds   in 


4;ij.  APPENDIX 

their  hands  shall  be  liable  in  like  manner  and  to  the  same 
extent  as  the  testator,  intestate,  ward,  or  person  interested 
in   such  trust-funds  would  be,  if  living  and  competent  to 
act  and  hold  the  stock  in  his  own  name. 
Act  June  3,  1864,  c.  100,  §  63,  13  Stat.  118. 

Sec.  5153.  [As  amended  1901.]  [Amended  Act  March 
4.  1907,  c.  2913,  §  3.] 

This  section  is  amended  by  Act  March  4,  1907,  c.  2913,  §  3,  to 
read  as  set  forth  below. 

ACT  MARCH  4,  1907,  c.  2913.     IH.  R.  13566.] 

An  Act  to  Amend  the   National  Banking  Act,  and  for 

Other  Purposes.    (34  Stat.  1289.) 
Be  it  enacted,  &c.,  [Section  1  amends  Act  March  14,  1900, 
c.  41,  §  6.-] 

This  section  amends  Act  March  14,  1900.  c.  41,  §  6,  Comp.  St.  1901, 
p.  141.  authorizing  the  Secretary  of  the  Treasury  to  receive  deposits 
of  gold  coin  and  to  issue  gold  certificates  therefor.  It  is  set  forth 
Comp.  St.  Supp.  1911,  p.  53. 

Sec.  2.  [Authorizes  issue  of  United  States  notes  of  small 
denominations  when  silver  certificates  are  insufficient.] 
This  section  authorizes  the  Secretary  of  the  Treasury,  when  the 
outstanding  silver  certificates  of  certain  small  denominations  issued 
under  Act  March  14.  1900,  c.  41,  Comp.  St.  1901,  pp.  2356-2360, 
are,  in  his  opinion,  insufficient  to  meet  the  public  demand  therefor,  to 
issue  United  States  notes  of  such  denominations,  an  equal  amount  of 
notes  of  higher  denominations  to  be  retired.  It  is  set  forth  Comp. 
St.  Supp.  1911,  p.  994. 

Amendment  of  Rev.  St.  §  5153.— Sec.  3.  That  section 
fifty-one  hundred  and  fifty-three  of  the  Revised  Statutes  be 
amended  to  read  as  follows : 

Duties  and  liabilities  when  designated  as  depositaries  of 
public  moneys. — Sec.  5153.  All  national  banking  associa- 
tions, designated  for  thlit  purpose  by  the  Secretary  of  the 
Treasury,  shall  be  depositaries  of  public  money,  under  such 
regulations  as  may  be  prescribed  by  the  Secretary ;  and 
they  may  also  be  employed  as  financial  agents  of  the  Gov- 
ernment; and  they  shall  perform  all  such  reasonable  du- 
ties, as  depositaries  of  pulilic  money  and  financial  agents 
of  the  Government,  as  may  be  required  of  them.  The  Sec- 
retary of  the  Treasury  shall  require  the  associations  thus 
designated  to  give  satisfactory  security,  by  the  deposit  of 
United   States  bonds   and   otherwise,  for   the   safe-keepin:; 


ACTS  OP   CONfJHKSS        '  .  IK.") 

and  prompt  payment  (if  the  public  monev  deposited  with 
them,  and  for  the  faithful  performance  of  their  duties  as 
financial  agents  of  the  Government:  Provided,  That  the 
Secretary  shall,  on  or  before  t'he  first  of  JanuitT^Tof  each 
year,  make  a  public  statement  of  the  securities  required 
during-  that  year  for  such  deposits.  And  everv  association 
so  designated  as  receiver  or  depositarv  of  the  public  money 
shall  take  and  receive  ajt  par  all  of  the  natii)nal  currency 
bills,  by  whatever  association  issued,  which  have  been  paid 
into  the  Government  for  internal  revenue,  or  for  loans  or 
stocks:  Provided,  That  the  Secretary  of  the  Treasury 
shall  distribute  the  deposits  herein  provided  for,  as  far  as 
practicable,  equitably  between  the  different  States  and  sec- 
tions. 

Act  March  4,  1007,  c.  201.3.  §  S.  .34  Stat.  1200. 
Rev.  St.  S  5153  (Act  .Tune  3.  1S64,  c.  lOa,  §  4.".  13  Stat.  113).  set 
forth,  as  previously  amended  by  Act  March  3.  1001,  c.  S71,  §  .3,  in 
Comp.  St.  1001,  p.  34G5,  is  further  amended  by  this  section'  to  read 
as  set  forth  here.  The  amendment  consists  principally  in  the  omis- 
sion, after  the  words  "shairbe  depositaries  of  public  money,"  of  the 
words  contained  in  the  section  as  originally  enacted,  "except  re- 
ceipts from  customs;"  the  omission  also,  after  the  words  "under  such 
regulations  as  may  be  prescribed  by  the  Secretary,"  of  the  words  in- 
serted by  amendment  by  said  Act  March  3,  1001,  c.  871,  §  3,  "but 
receipts  derived  from  duties  on  imports  in  Alaska,  the  Hawaiian  Is- 
lands, and  other  islands  under  the  jurisdiction  of  the  United  States 
may  be  deposited  in  such  depositaries  subject  to  such  regulations;" 
the  insertion  of  the  proviso  "That  the  Secretary  of  the  Treasury 
shall,  on  or  before  the  first  of  .January  of  each  year,  make  a  pul)li'c 
statement  of  the  securities  required  during  that  year  for  such  de- 
posits;" and  the  addition,  at  the  end  of  the  section  as  originally 
enacted,  of  the  proviso  "That  the  Secretary  of  the  Treasury  shall  dis- 
tribute the  deposits  herein  provided  for,  as  far  as  practicable,  equita- 
bly between  the  dilTerent  States  and   sections." 

The  provisions  of  Rev.  St.  §  5101,  post,  relating  to  reserves  of  na- 
tional banks,  are  not  to  api)ly  to  deposits  of  i)ublic  monevs  in  desig- 
nated depositaries,  by  Act  May  30,  1908,  c.  220,  §  14,  set  forth  be- 
low. 

Provisions  as  to  the  rate  of  interest  payable  on  deposits  of  public 
moneys  in  national  banks  designated  as  depositaries  are  contained  in 
Act  May  30,   1008.  c.  220,  §  15.  set  forth  below. 

As  to  the  provisions  of  sections  1,  2.  of  said  Act  March  4,  1907 
c.  2013,  see  Comp.  St.  Supp.  1911,  p.  1515. 

Sec.  4.     [Amends  Act  July  12,  1882,  c.  290,  §  9.] 

This  section  amends' Act  July  12.  1882.  c.  200.  §  0,  as  amended  by 
Act  March  14,  1000,  c.  41,  §  12.  Comp.  St.  1001,  p.  3473.  providing 
for  withdrawal,  by  a  national  banking  association,  of  its  circulating 
notes,  on  deposit  of  lawful  money,  and  withdrawal  of  l)..nds  held  as 
security  for  such  notes.     The  section  so  amended  is   again  amended 


496  APrE.NDix 

bv  Act  Mny  30.  1908.  c.  220.  §  10.  which  is  set  forth,  with  said  sec- 
tion as  further  amended,   post,  under  Rev.   St.  §  5167. 

Other  provisions  relating  to  the  duties  and  liabilities  of  depositaries 
are  contained  in  Rev.  St.  §§  3640-3649.  See,  also,  Comp.  St.  Supp. 
1911,   pp.   1015-1018.  .     ^       ,r 

Provisions  defining  and  punishing  the  embezzlement  of  pubhc  mon- 
eys by  any  public  depositary  are  contained  in  Act  March  4,  1909,  c. 
321,  §  88,  Comp.  St.  Supp.  1911,  p.  1615. 

As  to  deposits  of  Indian  moneys,  see  Act  April  30,  1908,  c.  lo6, 
§  1,  35  Stat.  73   (Comp.  St.  Supp.  1911,  p.  91). 

ACT  MAY  30,  1908,  c.  229,  §§  14,  15.     [H.  R.  21871.] 

Provisions  relating  to  reserves  of  national  banks  not  to 
apply  to  deposits  of  public  moneys  in  designated  deposi- 
taries.—Sec.  14.  That  the  provisions  of  section  fifty-one 
hundred  and  ninety-one  of  the  Revised  Statutes,  with  ref- 
erence to  the  reserves  of  national  banking  associations, 
shall  not  apply  to  deposits  of  public  moneys  by  the  United 
States  in  designated  depositaries. 

Act  May  30.  1908,  c.  229,  §  14,  35  Stat.  552. 

This  section  and  the  section  next  following  are  part  of  an  act  to 
amend  the  national  banking  laws,  cited  above,  the  other_  sections  of 
which  are  set  forth  or  referred  to  post,  under  Rev.  St.  §  5167. 

Rate  of  interest  on  special  and  additional  deposits  in  na- 
tional banks  designated  as  depositaries. — Sec.  15.  That  all 
national  banking  associations  designated  as  regular  deposi- 
taries of  public  money  shall  pay  upon  all  special  and  addi- 
tional deposits  made  by  the  Secretary  of  the  Treasury  in 
such  depositaries,  and  all  such  associations  designated  as 
temporary  depositaries  of  public  money  shall  pay  upon  all 
sums  of  public  money  deposited  in  such  associations  in- 
terest at  such  rate  as  the  Secretary  of  the  Treasury  may 
prescribe,  not  less,  hovv^ever,  than  one  per  centum  per  an- 
num upon  the  average  monthly  amount  of  such  deposits: 
Provided,  however,  That  nothing  contained  in  this  Act 
shall  be  construed  to  change  or  modify  the  obligation  of 
any  association  or  any  of  its  officers  for  the  safe-keeping 
of  public  money:  Provided  further,  That  the  rate  of  in- 
terest charged  upon  such  deposits  shall  be  equal  and  uni- 
form throughout  the  United  States. 

Act  May  30,  1908,  c.  229,  §  15.  35  Stat.  552. 

See   note   under   preceding   section   of   this   act. 

Sec.  5154.  Organization  of  State  banks  as  national 
banking  associations. — Any  bank  incorporated  by  special 
law,   or   any   banking  institution   organized   under  a   gen- 


ACTS   OF   rONOUKSS  4!>7 

eral  law  of  any  State,  may  become  a  national  association 
under  tlris  Title  by  the  name  prescril)cd  in  its  organization 
certificate;  and  in  such  case  the  articles  of  association  and 
the  organization  certificate  may  be  executed  by*-a  majority 
of  the  directors  of  the  bank  or  banking  institution;  and  the- 
certificate  shall  declare  that  the  owners  of  two-thirds  of 
the  capital  stock  have  authorized  the  directors  to  make 
such  certificate,  and  to  change  and  cotivert  the  bank  or 
banking  institution  into  a  national  association.  A  majority 
of  the  directors,  after  executing  the  articles  of  association 
and  organization  certificate,  shall  have  power  to  execute 
all  other  papers,  and  to  do  whatever  may  be  required  to 
make  its  organization  perfect  and  complete  as  a  national 
association.  The  shares  of  any  such  bank  may  continue  to 
be  for  the  same  amount  each  as  they  were  before  the  con- 
version, and  the  directors  may  continue  to  be  the  directors 
of  the  association  until  others  are  elected  or  appointed  in 
accordance  with  the  provisions  of  this  chapter;  and  an}- 
State  bank  which  is  a  stockholder  in  any  other  bank,  by 
authority  of  State  laws,  may  continue  to  hold  its  stock,  al- 
though either  bank,  or  both,  may  be  organized  under  and 
have  accepted  the  provisions  of  this  Title.  When  the: 
Comptroller  of  the  Currency  has  given  to  such  associatiou 
a  certificate,  under  his  hand  and  official  seal,  that  the  pro- 
visions of  this  Title  have  been  complied  with,  and  that  it 
is  authorized  to  commence  the  business  of  banking,  the  as- 
sociation shall  have  the  same  powers  and  privileges,  and 
shall  be  subject  to  the  same  duties,  responsibilities,  and 
rules,  in  all  respects,  as  are  prescribed  for  other  associa- 
tions originally  organized  as  national  banking  associations, 
and  shall  be  held  and  regarded  as  such  an  association.  But 
no  such  association  shall  have  a  less  capital  than  the 
amount  prescribed  for  associations  organized  under  this 
Title. 

Act  June  3,  1SG4,  c.  106,  §  44,  13  Stat.  112. 

Provisions  relating  to  tlie  conversion  of  national  gold  banks  into 
currency  banks  are  contained  in  Act  Feb.  14,  ISSO,  c.  25,  post,  fol- 
lowing Rev.  St.  §  5186. 

Sec.  5155.     State    banks    having   branches. — It    shall   be 
lawful  for  any  bank  or  banking  association  organized  un- 
der  State   laws,    and    having   branches,    the   capital    being 
joint  and  assigned  to  and  used   by  the'  mother-bank  and 
Tiff.Bks.&  B.— 32 


•4l)S 


APPENDIX 


branches  in  definite  proportions,  to  become  a  national  bank- 
ing- association  in  conformity  with  existing  laws,  and  to  re- 
tain and  keep  in  operation  its  branches,  or  such  one  or  more 
of  them  as  it  may  elect  to  retain ;  the  amount  of  the  circu- 
lation redeemable  at  the  mother-bank,  and  each  branch,  to 
be  regulated  by  the  amount  of  capital  assigned  to  and  used 
by  each. 

Act  March  3,  1865,  c.  78,  §  7,  13  Slat.  484. 

Sec.  5156.  Reservation  of  rights  of  associations  organ- 
ized under  act  of  1863. — Nothing  in  this  Title  shall  artect 
any  appointments  made,  acts  done,  or  proceedings  had  or 
commenced  prior  to  the  third  day  of  June,  eighteen  hun- 
dred and  sixty-four,  in  or  toward  the  organization  of  any 
national  banking  association  under  the  act  of  February 
twenty-five,  eighteen  hundred  and  sixty-three;  but  all  as- 
sociations which,  on  the  third  day  of  June,  eighteen  hun- 
dred and  sixty-four,  were  organized  or  commenced  to  be 
organized  under  that  act,  shall  enjoy  all  the  rights  and  priv- 
ileges granted,  and  be  subject  to  all  the  duties,  liabilities, 
and  restrictions  imposed  by  this  Title,  notwithstanding  all 
the  steps  prescribed  by  this  Title  for  the  organization  of 
associations  were  not  pursued,  if  such  associations  were 
duly  organized  under  that  act. 

Act  June  3,  1864,  c.  106,  §  62.  13  Stat.  118. 

CHAPTER  TWO— OBTAINING  AND  ISSUING  CIR- 
CULATING NOTES 


Sec. 

5157.  What    associations    are    governed 

by  chapters  2,  3,  and  4. 

5158.  Registered  bonds  intended  by  the 

term  "United  States  bonds." 

5159.  Deposits    of    bonds     required    be- 

fore   issue   of   circulating   notes. 

5160.  Increase    or    reduction    of    deposit 

to  correspond  with  capital. 

5161.  Exchange  of  coupon  for  registered 

bonds. 

5162.  Manner    of    making    transfers    of 

bonds. 

5163.  Registry 'of  transfers. 

51G4.  Notice  of  transfer  to  be  given   to 

association  interested. 
5165.  Examination      of     ^registry      and 

bonds. 


Sec. 

5166.  Annual    examination    of   bonds   by 

associations. 

5167.  Custody  of  bonds,  collection  of  in- 

terest, etc. 
Act  June  20,    1S74,    c.   343,    §   4. 

Withdrawal    of    circulating    notes 

on  deposit  of  lawful  money  and 

withdrawal  of  bonds. 
Act  July   12,    1882,   c.    290,    §§   S,    9. 

8.  Amount   of   bonds    required    to   be 

on  deposit;  reduction  of  amount 
or  retirement  in  full  of  circulat- 
ing notes. 

9.  [As   amended.   Act   March   4,    1907, 

c.  2913,  §  4,  and  Act  May  30,  190S. 
c.  229,  §  10.]  Withdrawal  of  cir- 
culating    notes    on     deposit    of 


ACTS  OF  coN(;ui:ss 


499 


Sec. 


Act 
1, 


14 


lawful    money,    etc.,    and    with- 
drawal  of  bonds   or  other   secu- 
rities. 
May  JO,  190S,  c.  229. 

National  currency  associations; 
formation  by  national  banks; 
officers ;  powers;  additional  cir- 
culating notes  on  deposit  of  se- 
curities; liability  of  banks  and 
lien  on  asset.s  for  redemption  of 
notes,  and  remedies  for  enforce- 
ment. 

Failure  of  bank  belonging  to  as- 
sociation to  preserve  or  make 
good  redemption  fund  ;  applica- 
tion of  fund  belonging  to  other 
banks;  sale  of  securities  de- 
posited by  bank  with  associa- 
tion. 

Issue  of  additional  circulating 
notes  on  deposit  of  bonds,  other 
than  United  States  bonds;  bonds, 
etc.,  that  may  be  accepted  as 
security. 

Bonds  deposited  under  section  3 
to  be  transferred  to  Treasurer; 
receipts;  assignments;  applica- 
tion of  provisions  relating  to 
registry,  notice  of  transfers,  ex- 
aminations and  custody,  etc.,  of 
bonds. 

Status  of  additional  circulating 
notes;     limitations   of  amount. 

Additional  redemption  fund"  for 
additional  circulating  notes  out- 
standing. 

Distribution  of  additional  circu- 
lating notes  proportionate  to 
capital  and  surplus  of  national 
banks  in  each  state;  emergency 
assignments  of  amounts  not  ap- 
plied  for. 

Information  as  to  securities  ac- 
ceptable to  be  obtained  by  Sec- 
retary of  the  Treasury  and  fur- 
nished  to   national   banks. 

[Amends   Rev.    St.  §   5214.1 

[Amends  Act  July  12,  18S2,  c.  290, 
§    9.] 

[Amends  Rev.    St.   §  5172.] 

[Relates  to  redemption  of  circu- 
lating  notes.] 

Authority  of  Secretary  of  Treas- 
ury as  to  acts  and  orders  of 
Comptroller  of  the  Currency  and 
organization  and  management  of 
associations. 
,  15.  [Relate  to  deposits  of  public 
moneys  in  national  banks.] 


Sec. 
IC.  Appropriation. 
17-19.  [Relate   to   "National   Monetary 

Commission."] 
20.  Limitation   of   act. 

5168.  Comptroller  to   determine  If  asso- 

ciations  can  commence  business. 

5169.  Certificate    of    authority    to    com- 

mence banking  to  be  issued. 

5170.  Publication  of   certificate. 

5171.  [Repealed.] 

Act  March  14,  1900,  c.  41,  §  12. 

Delivery  of  circulating  notes. 

5172.  [As   amended.   Act  May  30,   c.  229, 

§   11.]      Printing,    denominations, 
and     form     of     the     circulating 
notes,  etc. 
Act  June  20,  1874,   c.  343,  |  5. 

Charter-numbers  to  be  printed  on 
notes. 
Act  March   3,  1875,   c.  130,   §  1. 

Distinctive      paper      for      printing 
notes. 

5173.  Plates  and  dies  to  be  under   con- 

trol of  Comptroller. 

5174.  Annual     examination     of     plates, 

dies,   etc. 

5175.  Limit  to  issue  of  notes  under  five 

dollars. 

5176.  [Repealed.] 

5177.  [Repealed.] 

Act  Jan.  14,  1875,  c.  15,  §  3. 

Aggregate    amount    of    circulating 
notes  not   limited. 

5178.  [Superseded.] 

5179.  [Superseded.] 

5180.  [Repealed.] 
51S1.  [Superseded.] 

5182.  For   what  demands  national  bank 

notes  may  be   received. 

5183.  Issue   of  otner  notes   prohibited. 

5184.  Destroying    and    replacing    worn- 

out  and  mutilated  notes. 

5185.  Organization  of  asso'-iations  to  is- 

sue gold  notes  authorized. 

Act   Jan.   19,   1875,   c.  19. 

Removal  of  limitation  on  circula- 
tion of  gold  banks. 

51S6.  Their  lawful  money  reserve,  and 
duty  of  receiving  notes  of  other 
associations. 

Act  Feb.   14,    1880,  c.  25. 

Conversion  of  national  gold  banks 
into  currency  banks. 

5187.  Penalty     for     issuing     circulating 
.  notes    to    unauthorized    associa- 
tions. 

5188.  [Repealed.] 

5189.  [Repealed.] 


nOO  APPENDIX 

Sec.  5157.  What  associations  are  governed  by  chapters 
2,  3,  and  4. — The  provisions  of  chapters  two,  three,  and 
four  of  this  Title,  which  are  expressed  without  restrictive 
words,  as  applying  to  "national  banking  associations,"  or 
to  "associations,"  apply  to  all  associations  organized  to 
carry  on  the  business  of  banking  under  any  act  of  Con- 
gress. 

Sec.  5158.     Registered    bonds    intended    by    the     term 
"United  States  bonds." — The  term  "United  States  bonds." 
as  used  throughout  this  chapter,  shall  be  construed  to  mean 
registered  bonds  of  the  United  States. 
Act  June  3,  1864,  c.  106,  §  4,  13  Stat.  100. 

Sec.  5159.  Deposit  of  bonds  required  before  issue  of  cir- 
culating notes. — Every  association,  after  having  complied 
with  the  provisions  of  this  Title,  preliminary  to  the  com- 
mencement of  the  banking  business,  and  before  it  shall  be 
authorized  to  commence  banking  business  under  this  Title, 
shall  transfer  and  deliver  to  the  Treasurer  of  the  United 
States  any  United  States  registered  bonds,  bearing  inter- 
est, to  an  amount  not  .less  than  thirty  thousand  dollars  and 
not  less  than  one-third  of  the  capital  stock  paid  in.  Such 
bonds  shall  be  received  by  the  Treasurer  upon  deposit,  and 
shall  be  by  him  safely  kept  in  his  office,  until  they  shall 
be  otherwise  disposed  of,  in  pursuance  of  the  provisions 
of  this  Title. 

Act  .Tune  3.  1864,  c.  106,  §  16.  13  Stat.  104. 

Banks  ha\nng  a  capital  of  .$1.50.000,  or  les.s,  are  not  required  to 
keep  on  deposit  bonds  in  excess  of  one-fourth  of  the  capital  stock  as 
security  for  their  circulating  notes,  by  Act  July  12,  1882,  c.  290,  § 
8,   post,   following  Rev.   St.   §   .5167. 

The  issue  of  additional  circulating  notes,  on  deposit  of  securities 
other  than  United  States  bonds,  is  authorized  by  provisions  of  Act 
May  30.  1908,  c.  229.  set  forth  post,  under  Rev.  St.  §  5167. 

Panama  canal  bonds,  issued  under  Act  Aug.  5,  1909,  c.  6,  §  39,  36 
Stat.  117  (Comp.  St.  Supp.  1911,  p.  10.53),  are  not  receivable  by 
the  Treasurer  of  the  United  States  for  the  issue  of  circulating  notes. 
Act  March  2,  1911,  c.  19.5,  .30  Stat.  1013. 

Sec.  5160.  Increase  or  reduction  of  deposit  to  corre- 
spond with  capital. — The  deposit  of  bonds  made  by  each 
association  shall  be  increased  as  its  capital  may  be  paid  up 
or  increased,  so  that  every  association  shall  at  all  times 
have  on  deposit  with  the  Treasurer  registered  United  States 
bonds  to  the  amount  of  at  least  one-third  of  its  capital 
stock  actually  paid  in.     And  any  association  that  may  de- 


ACTS   OF   CONGKi:SS  .~()1 

sire  to  reduce  its  capital  or  to  close  up  its  business  and  dis- 
solve its  or^i^anization,  may  take  up  its  bonds  upon  return- 
ing to  the  Comptroller  its  circulating  notes  in  tjig.  propor- 
tion hereinafter  required,  or  may  take  up  any  excess  of 
bonds  beyond  one-third  of  its  capital  stock,  and  upon  which 
no  circulating  notes  have  been  delivered. 
Act  Juno  3.   18G4.  c.   lOG.   §   IG.  13   Stnt.   104. 

Sec.  5161.     Exchange  of  coupon  for  registered  bonds. — 

To  facilitate  a  compliance  with  the  two  preceding  sections, 
the  Secretary  of  the  Treasury  is  authorized  to  receive  from 
any  association,  and  cancel,  any  United  States  coupon 
bonds,  and  to  issue  in  lieu  thereof  registered  bonds  of  like 
amount,  bearing  a  like  rate  of  interest,  and  having  the 
same  time  to  run. 

Act  June  3,  1864.  c.  106,  §  16,  13  Stat.   104. 

Sec.  5162.  Manner  of  making  transfers  of  bonds. — All 
transfers  of  United  States  bonds,  made  bv  any  association 
under  the  provisions  of  this  Title,  shall  be  made  to  the 
Treasurer  of  the  United  States  in  trust  for  the  association, 
with  a  memorandum  written  or  printed  on  each  bond,  and 
signed  by  the  cashier,  or  some  other  officer  of  the  associa- 
tion making  the  deposit.  A  receipt  shall  be  given  to  the 
association,  b}-  the  Comptroller  of  the  Currency,  or  by  a 
clerk  appointed  by  him  for  that  purpose,  stating  that  the 
bond  is  held  in  trust  for  the  association  on  whose  behalf 
the  transfer  is  made,  and  as  security  for  the  redemption  and 
payment  of  any  circulating  notes  that  have  been  or  may 
be  delivered  to  such  association.  No  assignment  or  trans- 
fer of  any  such  bond  by  the  Treasurer  shall  be  deemed  valid 
unless  countersigned  by  the  Comptroller  of  the  Currencv. 

Act   June  ?,.  1864,   c.   106.  §   19,   13   Stat.   10."i. 

Sec.  5163.  Registry  of  transfers. — The  Comptroller  of 
the  Currency  shall  keep  in  his  Office  a  book  in  which  he 
shall  cause  to  be  entered,  immediately  upon  countersigning 
it,  every  transfer  or  assignment  by  the  Treasurer,  of  any 
bonds  belonging  to  a  national  banking  association,  pre- 
sented for  his  signature.  He  shall  state  in  such  entry  the 
name  of  the  association  from  whose  accounts  the  transfer 
is  made,  the  name  of  the  party  to  whom  it  is  made,  and  the 
par  value  of  the  bonds  transferred. 

Act  June  3.  1864.  c.  106,  §§  10.  20,  13  Stat.  105. 


,j()2  APPENDIX 

Sec.  5164.  Notice  of  transfer  to  be  given  to  association 
interested. — The  Comptroller  of  the  Currency  shall,  imme- 
diately upon  countersigning  and  entering  any  transfer  or 
assignment  bv  the  Treasurer,  of  any  bonds  belonging  to  a 
national  banking  association,  advise  by  mail  the  association 
from  whose  accounts  the  transfer  is  made,  of  the  kind  and 
numerical  designation  of  the  bonds,  and  the  amount  thereof 
so  transferred. 

Act  June  3,  1864,  c.  lOG,  §  19.  13  Stat.  10.5. 

Sec.  5165.     Examination    of    registry    and    bonds. — The 

Comptroller  of  the  Currency  shall  have  at  all  times,  during 
office-hours,  access  to  the  books  of  the  Treasurer  of  the 
United  States  for  the  purpose  of  ascertaining  the  correct- 
ness of  any  transfer  or  assignment  of  the  bonds  deposited 
by  an  association^  presented  to  the  Comptroller  to  coun- 
tersign; and  the  Treasurer  shall  have  the  like  access  to 
the  book  mentioned  in  section  fifty-one  hundred  and  sixty- 
three,  during  office-hours,  to  ascertain  the  correctness  of 
the  entries  in  the  same;  and  the  Comptroller  shall  also 
at  all  times  have  access  to  the  bonds  on  deposit  with  the 
Treasurer,  to  ascertain  their  amount  and  condition. 
Act  June  3,  1864,  c.  106,  §  20,  13  Stat.  105. 

Sec.  5166.  Annual  examination  of  bonds  by  associations. 
— Every  association  having  bonds  deposited  in  the  office 
of  the  Treasurer  of  the  United  States  shall,  6nce  or  oftener 
in  each  fiscal  year,  examine  and  compare  the  bonds  pledged 
by  the  association  with  the  books  of  the  Comptroller  of 
the  Currency  and  with  the  accounts  of  the  association,  and, 
if  they  are  found  correct,  to  execute  to  the  Treasurer  a 
certificate  setting  forth  the  different  kinds  and  the  amounts 
thereof,  and  that  the  same  are  in  the  possession  and  cus- 
tody of  the  Treasurer  at  the  date  of  the  certificate.  Such 
examination  shall  be  made  at  such  time  or  times,  during 
the  ordinary  business  hours,  as  the  Treasurer  and  the 
Comptroller,  respectively,  may  select,  and  may  be  made 
by  an  officer  or  agent  of  such  association,  duly  appointed 
in  writing  for  that  purpose;  and  his  certificate  before  men- 
tioned shall  be  of  like  force  and  validity  as  if  executed  by* 
the  president  or  cashier.  A  duplicate  of  such  certificate, 
signed  by  the  Treasurer,  shall  be  retained  by  the  associa- 
tion. 

Act  June   3,   1864,   c.  106,  §  2.5,  13   Stat.  106., 


ACTS   OF    CONOKR.SS  503 

Sec.  5167.     Custody  of  bonds,  collection  of  interest,  etc. 

— The  bonds  transferred  U)  and  dci)<)sitcii  with  the  Treas- 
urer of  the  United  vStatcs,  by  any  association,  for  the  se- 
curity of  its  circulating  notes,  shall  be  held  exclj^-ely  for 
that  purpose,  until  such  notes  are  redeemed,  except  as  pro- 
vided in  this  Title.  The  Comptroller  of  the  Currency  shalj 
give  to  any  such  association  powers  of  attorney  to  receive 
and  appropriate  to  its  own  use  the  interest  on  the  bonds 
which  it  has  so  transferred  to  the  Treasurer;  but  such 
powers  shall  become  inoperative  whenever  such  association 
fails  to  redeem  its  circulatino-  notes.  Whenever  the  market 
or  casli  value  of  any  bonds  thus  deposited  with  the  Treas- 
urer is  reduced  below  the  amount  of  the  circulation  issued 
for  the  same,  the  Comptroller  may  demand  and  receive 
the  amount  of  such  depreciation  in  other  United  States 
bonds  at  cash  value,  or  in  money,  from  the  association,  to 
be  deposited  with  the  Treasurer  as  long  as  such  deprecia- 
tion, continues.  And  the  Comptroller,  upon  the  terms  pre- 
scribed by  the  Secretary  of  the  Treasury,  may  permit  an 
exchange  to  be  made  of  any  of  the  bonds  deposited  with 
the  Treasurer  by  any  association,  for  other  bonds  of  the 
United  States  authorized  to  be  received  as  security  for  cir- 
-culating  notes,  if  he  is  of  opinion  that  such  an  exchange 
can  be  made  without  prejudice  to  the  United  States;  and 
he  may  direct  the  return  of  any  bonds  to  the  association 
which  transferred  the  same,  in  sums  of  not  less  than  one 
thousand  dollars,  upon  the  surrender  to  him  and  the  cancel- 
lation of  a  proportionate  amount  of  such  circulating  notes: 
Provided,  That  the  remaining  l)onds  which  shall  have  been 
transferred  by  the^association  offering  to  surrender  circu- 
lating notes  are  equal  to  the  amount  required  for  the  cir- 
culating notes  not  surrendered  by  such  association,  and  that 
the  amount  of  bonds  in  the  hands  of  the  Treasurer  is  not 
diminished  below  the  amount  required  to  be  kept  on  de- 
posit with  him,  and  that  there  has  been  no  failure  by  the 
association  to  redeem  its  circulating  notes,  nor  anv  other 
violation  by  it  of  the  provisions  of  this  Title,  and  that  the 
market  or  cash  value  of  the  remaining  bonds  is  not  below 
the  amount  required  for  the  circulation  issued  for'  the  same. 

Act  June  3,  1SG4,  c.  106,  §  26.  13  Stat.  107. 

This   section   is   not  afloctod   by   Act  March   14,   1900,   c.  41.   §   12, 
post,  following  Rev.  St.  §  5171. 

Provisions   authorizing  tho   deposit  of  lawful   money,   the   return   of 
bonds  deposited,  and  the  withdrawal,  in  whole  or  in  part,  of  the  cir- 


504  APPENDIX 

culaling  notes,  are  contained  in  Act  June  20,  1874,  c.  743,  §  4,   and 
Act  July  12,  18S2,  c.  290,  §  9,  set  forth  below. 

ACT  JUNE  20,  1874,  c.   343,   §  4. 

Withdrawal  of  circulating  notes  on  deposit  of  lawful 
money  and  withdrav/al  of  bonds. — That  any  association  or- 
ganized under  this  act,  or  any  of  the  acts  of  which  this  is 
an  amendment,  desiring  to  withdraw  its  circulating  notes, 
in  whole  or  in  part,  may,  upon  the  deposit  of  lawful  money 
with  the  Treasurer  of  the  United  States  in  sums  of  not  less 
than  nine  thousand  dollars,  take  up  the  bonds  which  said 
association  has  on  deposit  with  the  Treasurer  for  the  secu- 
rity of  such  circulating  notes;  which  bonds  shall  be  as- 
signed to  the  bank  in  the  manner  specified  in  the  nine- 
teenth section  of  the  national-bank  act;  and  the  outstand- 
ing notes  of  said  association,  to  an  amount  equal  to  the 
legal-tender  notes  deposited,  shall  be  redeemed  at  the 
Treasury  of  the  United  States,  and  destroyed  as  now  pro- 
vided by  law:  Provided,  That  the  amount  of  the  bonds  on 
deposit'for  circulation  shall  not  be  reduced  below  fifty  thou- 
sand dollars. 

Act  June  20,  1874,  c.  343.  §  4,  18  Stat.  124. 

This   section   is    part   of   an   act   fixing    the    amount  of   the   United 

States  notes,  etc.,  other  sections  of  which  are  set  forth  or  referred 

to  post,  under  Rev.  St.  §  5192. 
Section  19  of  the  national  bank  act,  referred  to  in  this  section,  Avas 

incorporated  into  Rev.  St.  §§  5162-5164. 
Other    provisions    rel.'itinu;    to    the    withdrawal    of    circulating   notes 

are  contained  in  Act  July  12,  1882,  c.   290,  §  9,  as  amended  by  Act 

May  30,  1908,  c.  229,  §  10,  set  forth  beluw. 

ACT   JULY   12,   1882,   c.   290,    §  8. 

Amount  of  bonds  required  to  be  on  deposit;  reduction 
of  amount  or  retirement  in  full  of  circulating  notes. — Sec. 
8.  That  national  banks  now  organized  or  hereafter  organ- 
ized, having  a  capital  of  one  hundred  and  fifty  thousand  dol- 
lars, or  less,  shall  not  be  required  to  keep  on  deposit  or  de- 
posit with  the  Treasurer  of  the  United  States  United  States 
bonds  in  excess  of  one-fourth  of  their  capital  stock  as  secu- 
rity for  their  circulating  notes ;  but  such  banks  shall  keep  on 
deposit  or  deposit  with  the  Treasurer  of  the  United  States 
the  amount  of  bonds  as  herein  required.  And  such  of  those 
banks  having  on  deposit  bonds  in  excess  of  that  amount 
are  authorized  to  reduce  their  circulation  by  the  deposit  of 
lawful    money    as    provided   by    law ;    provided,    That    the 


ACTS   OF   COXOKKStS  50" 

amount  of  such  circulating  notes  shall  not  in  any  case  ex- 
ceed ninety  per  centum  of  the  par  value  of  the  bonds  depos- 
ited as  herein  provided :  Provided  further,  That^the  na- 
tional banks  which  shall  hereafter  make  deposits"^of  lawful 
money  for  the  retirement  in  full  of  their  circulation  shall  at 
the  time  of  their  deposit  be  assessed  for  the  cost  of  trans- 
porting" and  redeeming  their  notes  then  outstanding,  a  sum 
equal  to  the  average  cost  of  the  redemption  of  national- 
bank  notes  during  the  preceding  year,  and  shall  thereupon 
pay  such  assessment.  And  all  national  banks  which  have 
heretofore  made  or  shall  hereafter  make  deposits  of  lawful 
money  for  the  reduction  of  their  circulation  shall  be  assess- 
ed and  shall  pay  an  assessment  in  the  manner  specified  in 
section  three  of  the  act  approved  June  twentieth,  eighteen 
hundred  and  seventy-four,  for  the  cost  of  transporting  and 
redeeming  their  notes  redeemed  from  such  deposits  subse- 
quent! \'  to  June  thirtieth,  eighteen  hundred  and  eighty-one. 

Act   July  12,   1882,  c.  290,  §   8,  22  Stat.   164. 

Till'  limilation  of  the  circulation  to  not  t,o  exceed  90  per  centum 
of  the  bonds  deposited  is  superseded  by  Act  March  14,  1900,  c.  41, 
§   12,    post,   following   llev.    St.    §   HlTl. 

Act  June  20,  1S74,  c.  343,  §  3,  mentioned  in  this  section,  is  set  forth 
post,   following  Rev.  St.  §  5192. 

Section  9  of  said  Act  July  12,  1882.  c.  290,  set  forth,  as  amended 
by  the  repeal  of  part  thereof  by  Act  March  14,  1900.  c.  41,  §  12,  in 
Comp.  St.  1901,  p.  3473.  is  further  amended  by  Act  March  4,  1907,  c, 
2013,  §  4,  and  by  Act  :May  30,  1908.  c.  229,  §  10,  to  read  as  set  forth 
b(-l()\v. 

ACT  MAY  30,   1908,  c.  229,   §  10.      |II.  K.  21871.1 

Amendment  of  Act  July  12,  1882,  c.  290,  §  9.— That  sec- 
tion nine  of  the  Act  aj^proved  July  twelftli,  eighteen  hun- 
dred and  eighty-two,  as  amended  by  the  Act  approved 
j\Iarch  fourth,  nineteen  hundred  and  seven,  be  further 
amended  to  read  as  follows : 

Withdrawal  of  circulating  notes  on  deposit  of  lawful 
money,  etc.,  and  withdrawal  of  bonds  or  other  securities. — 
"Sec.  9.  That  any  national  banking  association  desiring  to 
withdraw  its  circulating  notes,  secured  by  deposit  of  United 
States  bonds  in  the' manner  provided  in  section  four  of  the 
Act  approved  June  twentieth,  eighteen  hundred  and  seven- 
ty-four, is  hereby  authorized  for  that  purpose  to  deposit 
lawful  money  v/ith  the  Treasurer  of  the  United  States  and, 
with  the  consent  of  the  Comptroller  of  the  Currency  and 
the  approval  of  the  Secretary  of  the  Treasury,  to  withdraw 


.~U6  APPENDIX 

a  proportionate  amount  of  bonds  held  as  security  for  its 
circulating-  notes  in  the  order  of  such  deposits:  Provided, 
That  not  more  than  nine  millions  of  dollars  of  lawful  mon- 
ey shall  be  so  deposited  during  any  calendar  month  for 
this  purpose. 

"Any  national  banking  association  desiring  to  withdraw 
any  of  its  circulating  notes,  secured  by  the  deposit  of  se- 
curities other  than  bonds  of  the  United  States,  may  make 
such  withdrawal  at  any  time  in  like  manner  and  effect  by 
the  deposit  of  lawful  .money  or  national  bank  notes  with 
the  Treasurer  of  the  United  States,  and  upon  such  deposit 
a  proportionate  share  of  the  securities  so  deposited  may 
be  withdrawn:  Provided,  That  the  deposits  under  this 
section  to  retire  notes  secured  by  the  deposit  of  securities 
other  than  bonds  of  the  United  States  shall  not  be  covered 
into  the  Treasury,  as  required  by  section  six  of  an  Act 
entitled  'An  Act  directing  the  purchase  of  silver  bullion 
and  the  issue \Df  Treasury  notes  thereon,  and  for  other  pur- 
poses,' approved  July  fourteenth,  eighteen  hundred  and 
ninety,  but  shall  be  retained  in  the  Treasury  for  the  pur- 
])ose  of  redeeming  the  notes  of  the  bank  making  such  de- 
posit." 

Act  May  30.  1908.  c.  229,  §  10.  35  Stat.  051. 

This  secticn  is  part  of  an  act  to  amend  the  national  banking  laws, 
the  other  sections  of  which  are  set  forth  or  referred  to  below. 

Act  July  12,  1882.  c.  290,  §  9,  amended  by  this  section,  is  set  forth. 
as  previously  amended  by  the  repeal  of  part  thereof  by  Act  March 
14.  1900.  c.  41.  §  12.  inX'omp.  St.  1901.  p.  3473.  It  was  further 
amended  by  Act  March  4,  1907,  c.  2913,  §  4,  34  Stat.  1290,  to 
read  as  follows: 

"That  any  national  banking  association  now  organized,  or  hereafter 
organized,  desiring  to  withdraw  its  circulating  notes,  upon  a  deposit 
of  lawful  money  with  the  Treasurer  of  the  United  Slates,  as  pro- 
vided in  section  four  of  the  Act  of  June  twentieth,  eighteen  hundred 
and  seventy-four,  or  as  provided  in  this  Act,  is  authorized  to  deposit 
lawful  money  and,  with  the  consent  of  the  Comptroller  of  the  Cur- 
rency and  the  approval  of  the  Secretary  of  the  Treasury,  withdraw  a 
proportionate  amount  of  the  bonds  held  as  security  for  its  circulat- 
ing notes  in  the  order  of  such  deposits:  Provided,  That  not  more 
than  nine  millions  of  dollars  of  lawful  money  shall  be  deposited  dur- 
ing any  calendar  month  for  this  purpose:  And  provided  further. 
That  the  provisions  of  this  section  shall  not  apply  to  bonds  called 
for  redemption  by  the  Secretary  of  the  Treasury,  nor  to  withdrawal 
of  circulating  notes  in   consequence   thereof." 

The  further  amendment  by  this  act,  besides  making  several  changes 
in  the  language  of  the  section  as  previously  amended,  added  thereto 
the  second  paragraph,  as  set  forth  here,  relating  to  withdrawal  of 
notes  secured  by  deposit  of  securities  other  than  United  States  bonds; 


ACTS  OF  coN<;itr:.ss  507 

the  issue  of  notes  on  deposit  of  such  seeurities  iieins  aiitliorizefl  by 
the  precofiinK  seetions  of  this  act.  See  Act  May  30,  TJOS,  c.  22'J,  §S 
1-S,  set  forth  below. 

Act  .Tune  20,  1874.  c.  34.3,  §  4,  mentioned  in  the  first  paragraph  of 
this   section,  is  set  forth   above.  -rt^ 

Act  July  14,  IS'JO,  c.  70.S,  §  0,  mentioned  in  the  second  paragraph 
of  this  section,  is  set  forth  post,  under  section  5102. 

ACT  MAY  30,  1908,  c.  229.     [11.  U.  21871.] 

An  Act  to  Amend  the  National  Banking  Laws.     (35  Stat. 

546.) 

National  currency  associations;  formation  by  national 
banks;  officers;  powers;  additional  circulating  notes  on 
deposit  of  securities ;  liability  of  banks  and  Hen  on  assets 
for  redemption  of  notes,  and  remedies  for  enforcement. — 
Be  it  enacted,  t!y:c.,  That  national  Ijanking"  associations,  each 
having  an  unimpaired  capital  and  a  surplus  of  not  less  than 
twenty  per  centum,  not  less  than  ten  in  nmnber,  having 
an  aggregate  capital  and  surplus  of  at  least  five  millions  of 
dollars,  may  form  voluntary  associations  to  be  designated 
as  national  currency  associations.  The  banks  uniting  to 
form  such  association  shall,  by  their  presidents  or  vice- 
presidents,  acting  under  authority  from  the  board  of  di- 
rectors, make  and  file  with  the  Secretary  of  the  Treasury 
a  certificate  setting  forth  the  names  of  the  banks  composing 
the  association,  the  principal  place  of  business  of  the  asso- 
ciation, and  the  name  of  the  association,  which  name  shall 
be  subject  to  the  approval  of  the  Secretary  of  the  Treas- 
luy.  Upon  the  filing  of  such  certificate  the  associated  banks 
therein  named  shall  become  a  body  corporate,  and  by  the 
name  so  designated  and  approved  may  sue  and  be  sued  and 
exercise  the  powers  of  a  body  corporate  for  the  purposes 
hereinafter  mentioned :  Provided,  That  not  more  than  one 
such  national  currency  association  shall  be  formed  in  any 
city :  Provided  further,  That  the  several  members  of  such 
national  currency  association  shall  be  taken,  as  nearly  as 
conveniently  may  be,  from  a  territory  composed  of  a  State 
or  part  of  a  State,  or  contiguous  parts  of  one  or  more 
States :  And  provided  further.  That  any  national  bank 
in  such  city  or  territory,  having  the  qualifications  herein 
prescribed  for  membership  in  such  national  currency  as- 
sociation, shall, -upon  its  application  to  and  upon 'the  ap- 
pro\al  of  the  Secretary  of  the  Treasury,  be  admitted  to 
membership  in  a  national  currency  association  for  that  city 


508  APPENDIX 

or  tecritory,  and  upon  such  admission  shall  be  deemed  and 
held  a  part  of  the  body  corporate,  and  as  such  entitled  to 
the  rights  and  privileges  and  subject  to  all  the  liabilities  of 
an  original  member:  And  provided  further,  That  each  na- 
tional currency  association  shall  be  composed  exclusively 
of  banks  not  members  of  any  other  national  currency  as- 
sociation. 

The  dissolution,  voluntary  or  otherwise,  of  any  bank  in 
such  association  shall  not  affect  the  corporate  existence  of 
the  association  unless  there  siiall  then  remain  less  than  the 
minimum  number  of  ten  banks :  Provided,  however.  That 
the  reduction  of  the  number  of  said  banks  below  the  mini- 
mum of  ten  shall  not  afTect  the  existence  of  the  corpora- 
tion with  respect  to  the  assertion  of  all  rights  in  favor  of 
or  against  such  association.  The  affairs,  of  the  association 
shall  be  managed  by  a  board  consisting  of  one  representa- 
tive from  each  bank.  By-laws  for  the  government  of  the 
association  shall  be  made  b}-  the  board,  subject  to  the  ap- 
proval of  the  Secretary  of  the  Treasury.  A  president,  vice- 
president,  secretary,  treasurer,  and  an  executive  committee 
of  not  less  than  five  members,  shall  be  elected  by  the  board. 
The  powers  of  such  board,  except  in  the  election  of  officers 
and  making  of  by-laws,  may  be  exercised  through  its  exec- 
utive committee. 

The  national  currency  association  herein  provided  for 
shall  have  and  exercise  any.  and  all  powers  necessary  to 
carry  out  the  purposes  of  this  section,  namely,  to  render 
available,  under  the  direction  and  control  of  the  Secretary 
of  the  Treasury,  as  a  basis  for  additional  circulation  any 
securities,  including  commercial  paper,  held  by  a  national 
banking, association.  For  the  purpose  of  obtaining  such  ad- 
ditional circulation,  any  bank  belonging  to  any  national 
currency  association,  having  circulating  notes  outstanding 
secured  by  the  deposit  of  bonds  of  the  United  States  to  an 
amount  not  less  than  forty  per  centum  of  its  capital  stock, 
and  which  has  its  capital  unimpaired  and  a  surplus  of  not 
less  than  twenty  per  centum,  may  deposit  with  and  trans- 
fer to  the  association,  in  trust  for  the  United  States,  for  the 
purpose  hereinafter  provided,  such  of  the  securities  above 
mentioned  as  may  be  satisfactory  to  the  board  of  the  as- 
sociation. The  officers  of  the  association-  may  thereupon, 
in  behalf  of  such  bank,  make  application  to  the  Comptroller 
of  the  Currencv  for  an  issue  of  additional  circulating  notes 


ACTS   OF   CONGKKSS  ~M) 

to  an  amount  not  exceeding  seventy-five  per  centum  of  the 
cash  value  of  the  securities  or  commercial  jjaper  so  de- 
posited. The  Comptroller  of  the  Currency  siiall  immedi- 
ately transmit  such  application  to  the  Secrctaj;;^  of  the 
Treasury  with  such  recommendation  as  he  thinks  proper, 
and  if,  in  the  judgment  of  the  Secretary  of  the  Treasury, 
business  conditions  in  the  locality  demand  additional  cir- 
culation, and  if  he  be  satisfied  with  the  character  and  value 
of  the  securities  proposed  and  that  a  lien  in  favor  of  the 
United  States  on  the  securities  so  deposited  and  on  the  as- 
sets of  the  banks  composing  the  association  will  be  amply 
sufficient  for  the  protection  of  the  United  States,  he  may  di- 
rect an  issue  of  additional  circulating  notes  to  the  associa- 
tion, on  behalf  of  such -bank,  to  an  amount  in  his  discretion, 
not,  however,  exceeding  seventy-five  per  centum  of  the  cash 
value  of  the  securities  so  deposited :  Provided,  That  upon 
the  deposit  of  any  of  the  State,  city,  town,  county,  or  other 
municipal  bonds  of  a  character  described  in  section  three  of 
this  Act,  circulating  notes  may  be  issued  to  the  extent  of 
not  exceeding  ninety  per  centum  of  the  market  value  of 
such  bonds  so  deposited:-  And  provided  further.  That  no 
national  banking  association  shall  be  authorized  in  any 
event  to  issue  circulating  notes  based  on  commercial  paper 
in  excess  of  thirty  per  centum  of  its  unimpaired  capital  and 
surplus.  The  term  "commercial  paper"  shall  be  held  to 
include  only  notes  representing  actual  commercial  transac- 
tions, which  when  accepted  by  the  association  shall  bear 
the  names  of  at  least  two  responsible  parties  and  have  not 
exceeding  four  months  to  run. 

The  banks  and  the  assets  of  all  banks  belonging  to  the 
association  shall  be  jointly  and  severally  liable  to  the  Unit- 
ed States  for  the  redemption  of  such  additional  circula- 
tion; and  to  secure  such  liability  the  lien  created  by  sec- 
tion fifty-two  hundred  and  thirty  of  the  Revised  Statutes 
shall  extend  to  and  cover  the  assets  of  all  banks  belong'ing 
to  the  association,  and  to  the  securities  deposited  by  the 
banks  with  the  association  pursuant  to  the  provisions  of 
this  Act;  but  as  between  the  several  banks  composing  such 
association  each  bank  shall  be  liable  only  in  the  proportion 
that  its  capital  and  surplus  bears  to  the  aggregate  capital 
and  surplus  of  all  such  banks.  The  association  may,  at  any 
time,  require  of  any  of  its  constituent  banks  a  deposit  of 
additional  securities  or  commercial  paper,  or  an  exchange 


510  APPENDIX 

of  the  securities  already  on  deposit,  to  secure  such  addi- 
tional circulation;  and  in  case  of  the  failure  of  such  bank 
to  make  such  deposit  or  exchange  the  association  may,  after 
ten  days'  notice  to  the  bank,  sell  the  securities  and  paper 
already  in  its  hands  at  public  sale,  and  deposit  the  proceeds 
with  the  Treasurer  of  the  United  States  as  a  fund  for  the 
redemption  of  such  additional  circulation.  If  such  fund  be 
insufficient  for  that  purpose  the  association  may  recover 
from  the  bank  the  amount  of  the  deficiency  by  suit  in  the 
circuit  court  of  the  United  States,  and  shall  have  the  ben- 
efit of  the  lien  hereinbefore  provided  for  in  favor  of  the 
United  States  upon  the  assets  of  such  bank.  The  associa- 
tion or  the  Secretary  of  the  Treasury  may  permit  or  require 
the  withdrawal  of  any  such  securities  or  commercial  paper 
and  the  substitution  of  other  securities  or  commercial  paper 
of  equal  value  therefor. 

Act  May  30,  1908,  c.  229,  §  1,  35  Stat.  546. 

Rev.  St.  §  5230,  mentioned  in  the  last  paragraph  of  this  section, 
creating  a  lien  on  the  assets  of  any  association  for  any  deficiency  in 
the  proceeds  of  its  bonds,  deposited  to  secure  its  circulating  notes,  to 
redeem  them,  is  set  forth  post. 

Failure  of  bank  belonging  to  national  currency  associa- 
tion to  preserve  or  make  good  redemption  fund;  applica- 
tion of  fund  belonging  to  other  banks;  sale  of  securities 
deposited  by  bank  with  association. — Sec.  2.  That  when- 
ever any  bank  belonging  to  a  national  currency  associa- 
tion shall  fail  to  preserve  or  make  good  its  redemption 
fund  in  the  Treasury  of  the  United  States,  required  by 
section  three  of  the  Act  of  June  twentieth,  eighteen  hun- 
dred and  seventy-four,  chapter  three  hundred  and  forty- 
three  and  the  provisions  of  this  Act,  the  Treasurer,  of  the 
United  States  shall  notify  such  national  currency  associa- 
tion to  make  good  such  redemption  fund,  and  upon  the 
failure  of  such  national  currency  association  to  make  good 
such  fund,  the  Treasurer  of  the  United  States  ma}-^  in  his 
discretion,  apply  so  much  of  the  redemption  fund  belonging 
to  the  other  banks  composing  such  national  currency  as- 
sociation as  may  be  necessary  for  that  purpose;  and  such 
national  currency  association  may,  after  five  days'  notice 
.  to  such  bank,  proceed  to  sell  at  public  sale  the  securities 
deposited  by  such  bank  with  the  association  pursuant  to 
the  provisions  of  section  one  of  this  Act,  and  deposit  the 
proceeds  with  the  Treasurer  of  the  United  States  as  a  fund 


ACTS   or   CONCIIKSS  511 

for  the  redemption  of  the  additional  circulation  taken  out 
by  such  bank  under  this  Act. 

Act  May  30.   VMS,  c.  L*2n,  §  2,  ST.  Stat,  H-iS. 

Act  June  20.  1874,  c.  34:;.  g  3.  meutioued  in  this  scctiotC  prnviding 
for  a  redemption  fund,  is  sot  forth  post,  following  Rev.  St.  §  51112. 

Issue  of  additional  circulating  notes  on  deposit  of  bonds, 
other  than  United  States  bonds ;  bonds,  etc.,  that  may  be 
accepted  as  security. — Sec.  3.  That  any  national  banking 
association  which  has  circulating  notes  outstanding,  secur- 
ed by  the  deposit  of  United  States  bonds  to  an  amount  of 
not  less  than  forty  per  centum  of  its  capital  stock,  and 
which  has  a  surplus  of  not  less  than  twenty  per  centum, 
may  make  application  to  the  Comptroller  of  the  Currency 
for  authority  to  issue  additional  circulating  notes  to  be  se- 
cured by  the  deposit  of  bonds  other  than  bonds  of  the 
United  States.  The  Comptroller  of  the  Currency  shall 
transmit  immediately  the  appliction,  with  his  recommen- 
dation, to  the  Secretary  of  the  Treasury,  who  shall,  if  in 
his  judgment  business  conditions  in  the  locality  demand 
additional  circulation,  approve  the  same,  and  shall  deter- 
mine the  time  of  issue  and  fix  the  amount,  within  the  lim- 
itations herein  imposed,  of  the  additional  circulating  notes 
to  be  issued.  Whenever  after  receiving  notice  of  such  ap- 
proval any  such  association  shall  deposit  with  the  Treas- 
urer or  any  assistant  treasurer  of  the  United  States  such 
of  the  bonds  described  in  this  section  as  shall  be  approved 
in  character  and  amount  by  the  Treasurer  of  the  United 
States  and  the  Secretary  of  the  Treasury,  it  shall  be  enti- 
tled to  receive,  upon  the  order  of  the  Comptroller  of  the 
Currency,  circulating  notes  in  blank,  registered 'and  coun- 
tersigned as  provided  by  law,  not  exceeding  in  amount 
ninety  per  centum  of  the  market  value,  but  not  in  excess  of 
the  par  value  of  any  bonds  so  depositerl,  such  market  value 
to  be  ascertained  and  determined  under  the  direction  of  the 
Secretary  of  the  Treasury. 

The  Treasurer  of  the  United  States,  with  the  approval  of 
the  Secretary  of  the  Treasury,  shall  accept  as  security  for 
the  additional  circulating  notes  provided  for  in  this  section, 
bonds  or  other  interest-bearing  obligations  of  any  State  of 
the  United  States,  or  any  legally  authorized  bonds  issued 
by  anv  city,  town,  county,  or  other  legally  constituted  mu- 
nicipality or  district  in  the  United  States  which  has  been  in 


512  APPENDIX 

existence  for  a  period  of  ten  years,  and  which  for  a  period  of 
ten  years  previous  to  such  deposit  has  not  defaulted  in  the 
payment  of  any  part  of  either  principal  or  interest  of  any 
funded  debt  authorized  to  be  contracted  by  it,  and  whose 
net  funded  indebtedness  does  not  exceed  ten  per  centum  of 
the  valuation  of  its  taxable  property,  to  be  ascertained  by 
the  last  preceding  valuation  of  property  for  the  assessment 
of  taxes.  The  Treasurer  of  the  United  States,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  shall  accept,  for 
the  purposes  of  this  section,  securities  herein  enumerated 
in  such  proportions  as  he  may  from  time  to  time  determine, 
and  he  mav  with  such  approval  at  any  time  require  the  de- 
posit of  additional  securities,  or  require  any  association  to 
change  the  character  of  the  securities  already  on  deposit. 
Act  May  30,  1908,  c.  229,  §  3,  35  Stat.  548. 

Bonds  deposited  under  section  3  to  be  transferred  to 
Treasurer ;  receipts ;  assignments ;  application  of  provi- 
sions relating  to  registry,  notice  of  transfers,  examinations 
and  custody,  etc.,  of  bonds. — Sec.  4.  That  the  legal  title 
of  all  bonds,  whether  coupon  or  registered,  deposited  to 
secure  circulating  notes  issued  in  accordance  with  the  terms 
of  section  three  of  this  Act  shall  be  transferred  to  the 
Treasurer  of  the  United  States  in  trust  for  the  associa- 
tion depositing  them,  under  regulations  to  be  prescribed 
by  the  Secretary  of  the  Treasury.  A  receipt  shall  be  given 
to  the  association  by  the  Treasurer  or  any  assistant  treas- 
urer of  "the  United  States,  stating  that  such  bond  is  held 
in  trust  for  the  association  on  whose  behalf  the  transfer  is 
made,  and  as  security  for  the  redemption  and  payment  of 
an)-  circulating  notes  that  have  been  or  may  be  delivered 
to  such  association.  No  assignment  or  transfer  of  any  such 
bond  by  the  Treasurer  shall  be  deemed  valid  unless  coun- 
tersigned by  the  Comptroller  of  the  Currency.  Thq,  pro- 
visions of  sections  fifty-one  hundred  and  sixty-three,  fifty- 
one  hundred  and  sixty-four,  fifty-one  hundred  and  sixty- 
five,  fifty-one  hundred  and  sixty-six,  and  fifty-one  hundred 
and  sixty-seven  and  sections  fifty-two  hundred  and  twenty- 
four  to  fifty-two  hundred  and  thirty-four,  inclusive;  of  the 
Revised  Statutes  respecting  United  States  bonds  deposited 
to  secure  circulating  notes  shall,  except  as  herein  modified, 


ACTS   OF   ('(^NCUKSS  513 

be  applicable  to  all  bonds  deposited  under  the  terms  of  sec- 
tion three  of  this  Act. 

Act  May  30,  190S.  c.  229,  §  4,  35  Stat.  549. 

Rev.  St.  §§  5103-5167,  mentioned  in  this  section,  are  setforth  above. 

Kev.  St.  §§  iJl'24-5234,  also  mentioned  in  this  section,  are  set  forth 

post. 

Status  of  additional  circulating  notes ;  limitations  of 
amount. — Sec.  5.  That  the  additional  circulating  ncjtes  is- 
sued under  this  Act  shall  be  used,  held,  and  treated  in  the 
same  way  as  circulating  notes  of  national  banking  associa- 
tions heretofore  issued  and  secured  b}-  a  deposit  of  United 
States  bonds,  and  shall  be  subject  to  all  the  provisions  ot 
law  affecting  such  notes  except  as  herein  expressly  modi- 
fied: Provided,  That  the  total  amount  of  circulating  notes 
outstanding  of  any  national  banking  association,  including 
notes  secured  by  United  States  bonds  as  now  provided  by 
law,  and  notes  secured  otherwise  than  by  deposit  of  such 
bonds,  shall  not  at  any  time  exceed  the  amount  of  its  un- 
impaired capital  and  surplus:  And  provided  further,  That 
there  shall  nOt  be  outstanding  at  any  time  circulating  notes 
issued  under  the  provisions  of  this  Act  to  an  amount  o< 
more  than  five  hundred  millions  of  dollars. 
Act  May  30,  1908.  c.  229,  §  5,  35  Stat.  .■')^9. 

Additional  redemption  fund  for  additional  circulating 
notes  outstanding. — Sec.  6.  That  whenever  and  so  long 
as  any  national  banking  association  has  outstanding  any 
of  the  additional  circulating  notes  authorized  to  be  issued 
by  the  provisions  of  this  Act  it  shall  keep  on  deposit  in 
the  Treasury  of  the  United  States,  in  addition  to  the  re- 
demption fund  required  by  section  three  o'f  the  Act  of  June 
twentieth,  eighteen  hundred  and  seventy-four,  an  additional 
sum  equal  to  five  per  centum  of  such  additional  circulation 
at  any  time  outstanding,  such  additional  five  per  centum  to 
be  treated,  held  and  used  in  all  respects  in  the  same  manner 
as  the  original  redemption  fund  provided  for  by  said  sec- 
tion three  of  the  Act  of  June  twentieth,  eighteen  hundred 
and  seventy-four. 

Act  May  30,   1908,  c.   229,   §  6,  35  Stat.  550. 

Act  June  20,  1874,  c.  343,  §  3.  mentioned  in  this  section,  is  set  forth 
post,  following  Kev.   St.  §  5192. 

Tifi.\Bks.&  B.— 33 


514  ArrENDix 

Distribution  of  additional  circulating  notes  proportionate 
to  capital  and  surplus  of  national  banks  in  each  state; 
emergency  assignments  of  amounts  not  applied  for. — Sec. 
7.  In  order  that  the  distribution  of  notes  to  be  issued  un- 
der the  provisions  of  this  Act  shall  be  made  as  equitable  as 
practicable  between  the  various  sections  of  the  country,  the 
Secretary  of  the  Treasury  shall  not  approve  applications 
from  associations  in  any  State  in  excess  of  the  amount  to 
which  such  State  would  be  entitled  of  the  additional  notes 
herein  authorized  on  the  basis  of  the  proportion  which  the 
unimpaired  capital  and  surplus  of  the  national  banking  as- 
sociations in  such  State  bears  to  the  total  amount  of  un- 
impaired capital  and  surplus  of  the  national  banking  as- 
sociations of  the  United  States:  Provided,  however,  That 
in  case  the  applications  from  associations  in  any  State 
shall  not  be  equal  to  the  amount  which  the  associations  pi 
such  State  would  be  entitled  to  under  this  method  of  dis- 
tribution, the  Secretary  of  the  Treasury  may,  in  his  dis- 
cretion, to  meet  an  emergency,  assign  the  amount  not  thus 
applied  for  to  any  applying  association^  or  associations  in 
States  in  the  same  section  of  the  country. 
Act  May  30,  1908,  c.  229,  §  7,  35  Stat.  550. 

Information  as  to  securities  acceptable  to  be  obtained  by 
Secretary  of  the  Trea^sury  and  furnished  to  national  banks. 
— Sec.  8.  That  it  shall  be  the  duty  of  the  Secretary  of 
the  Treasury  to  obtain  information  with  reference  to  the 
value  and  character  of  the  securities  authorized  to  be  ac- 
cepted under  the  provisions  of  this  Act,  and  he  shall  from 
time  to  time  furnish  information  to  national  banking  as- 
sociations as  to  such  securities  as  would  be  acceptable  un- 
der the  provisions  of  this  Act. 

Act  May  30,  1908,  c.  229,  §  8,  35  Stat.  550. 

Sec.  9.     [Amends  Rev.  St.  §  5214.] 
This  section  amends  Eev.  St.  §  5214,  and  is  set  forth  post. 

Sec.  10.     [Amends  Act  July  12,  1882,  c.  290,  §  9.] 
This   section   amends  Act  July  12,  1882,  c.   290,  §  9,  which,   as   so 
amended,  is  set  forth  above. 

Sec.  11.     [Amends  Rev.  St.  §  5172.] 

This  section  amends  Rev.   St.  §  5172,  and  is  set  forth  post,  under 
that  section. 


ACTS  OF  CONGRESS  ij\'i 

Sec.  12.     [Relates  to  redemption  of  circulating:^  notes.] 

This  section  provides  for  redemption  of  oirciilatinK  notes.  iin<l<-r 
Act  June  20,  1874,  §  3,  and  is  set  forth  post,  under  Rev^Jst.  §  5in2. 

Authority  of  Secretary  of  Treasury  as  to  acts  and  or- 
ders of  Comptroller  of  the  Currency  and  organization  and 
management  of  associations. — Sec.  13.  That  all  acts  and 
orders  of  the  Comptroller  of  the  Currency  and  the  Treas- 
urer of  the  United  States  authorized  by  this  Act  shall  have 
the  approval  of  the  Secretary  of  the  Treasury  who  shall 
have  power,  also,  to  make  any  such  rules  and  regulations 
and  exercise  such  cont'-ol  over  the  organization  and  man- 
agement of  national  currency  associations  as  may  be  nec- 
essary to  carry  out  the  purposes  of  this  Act. 
Act  May  30,  1908,  c.  229,  §  13,  35  Stat.  rw2. 

Sees.  14,  15.  [Relate  to  deposits  of  public  moneys  in 
national  banks.] 

Sections  14  and  15  of  this  act  relate  to  deposits  of  public  monejs  in 
national  banks  as  designated  depositaries,  and  are  set  forth  ante, 
under  Rev.  St.  S  515."j. 

Appropriation. — Sec.  16.  That  a  sum  sufficient  to  carry 
out  the  purposes  of  the  preceding-  sections  of  this  Act  is 
hereby  appropriated  out  of  any  money  in  the  Treasury  not 
otherwise  appropriated. 

Act  May  30,  1908,  c.  229,  §  16,  35  Stat.  552. 

Sees.  17-19.  [Relate  to  "National  Monetary  Commis- 
sion."] 

Sections  17,  18,  and  19  of  this  act  create  a  National  Monetary 
Commission,  prescribe  its  powers  and  duties,  and  make  an  appropria- 
tion for  the  expenses  thereof.  Thev  are  set  forth  Comp,  St.  Supp. 
1911,  p.  1008. 

Limitation  of  act. — Sec.  20.  That  this  Act  shall  expire 
by  limitation  on  the  thirtieth  day  of  June,  nineteen  hun- 
dred  and  fourteen. 

Act  May  30,  1908,  c.  229,  §  20.  35  Stat.  553. 

Sec.  5168.  Comptroller  to  determine  if  associations  can 
commence  business. — Whenever  a  certificate  is  transmitted 
to  the  Comptroller  of  the  Currency,  as  provided  in  this  Ti- 
tle, and  the  association  transmitting  the  same  notifies  the 
Comptroller  that  at  least  fifty  per  centum  of  its  capital 
stock  has  been  duly  paid  in,  and-  that  such  association  has 
complied  with  all  the  provisions  of  this  Title  required  to 


516  APPENDIX  '  1 

be  complied  with  before  an  association  shall  be  author- 
ized to  commence  the  business  of  banking,  the_  Comptroller 
shall  examine  into  the  condition  of  such  association,  ascer- 
tain especially  the  amount  oi  money  paid  in  on  account  of 
its  capital,  the  name  and  place  of  residence  of  each  of  its 
directors,  and  the  amount  of  the  capital  stock  of  which  each 
is  the  owner  in  good  faith,  and  generally  whether  such 
association  has  complied  wnth  all  the  provisions  of  this  Title 
required  to  entitle  it  to  engage  in  the  business  of  bank- 
ing; and  shall  cause  to  be  made  and  attested  by  the  oaths 
of  a  majority  of  the  directors,  and  by  the  president  or  cash- 
ier of  the  association,  a  statement  of  all  the  facts  neces- 
sary to  enable  the  Comptroller  to  determine  whether  the 
association  is  lav/fully  entitled  to  commence  the  business 
of  banking. 

Act  June  3,  1S64,  c.  lOG,  §  17,  13  Stat.   104. 

Sec.  5169.  Certificate  of  authority  to  commence  bank- 
ing to  be  issued. — If,  upon  a  careful  examination  of  the 
facts  so  reported,  and  of  any  other  facts  which  may  come 
to  the  knowledge  of  the  Comptroller,  whether  by  means  of 
a  special  commission  appointed  by  him  for  the  purpose 
of  inquiring  into  the  condition  of  such  association,  or 
otherwise,  it  appears  that  such  association  is  lawfully  enti- 
tled to  commence  the  business  of  banking,  the  Comptroller 
shall  give  to  such  association  a  certificate,  under  his  hand 
and  official  seal,  that  such  association  has  complied  with 
all  the  provisions  required  to  be  complied  with  before  com- 
mencing the  business  of  banking,  and  that  such  association 
is  authorized,  to  commence  such  business.  But  the  Comp- 
troller may  withhold  from  an  association  his  certificate 
authorizing  the  commencement  of  business,  whenever  he 
has  reason  to  suppose  that  the  shareholders  have  formed 
the  same  for  any  other  than  the  legitimate  objects  contem- 
plated by  this  Title. 

Act  June  3,  1864,  c.  lOG,  §§  12,  IS,  13  Stat.  102,  104. 

Sec.  5170.  Publication  of  certificate. — The  association 
shall  cause  the  certificate  issued  under  the  preceding  sec- 
tion to  be  published  in  some  newspaper  printed  in  the  city 
or  county  where  the  association  is  located,  for  at  least  sixty 
days  next  after  the  issuing  thereof;   or,  if  no  newspaper  is 


ACTS   OF   CONGRKSS  HIT 

pul)HshecI  in   such  city  or  county,  then  in  ihe  newspaper 
published  nearest  thereto. 

Act  June  3,  1S64,  c.  IOC,  §  IS,  13  Stat.  104.  ^^ 

Sec.  5171.     [Repealed.    Act  Aug.  12,  1882,  c.  290,  §  10.] 

This  section,  as  orisinally  enacted,  was  as  follows: 

"T^pon  a  deposit  of  bonds  as  prescribed  by  sections  fifty-one  hundred 
and  fifty-nine  and  fifty-one  hundred  and  sixty,  the  association  making 
the  same  shall  be  entitled  to  receive  from  the  Pomptroller  of  the  Cur- 
rency circulatinsr  notes  of  different  denominations,  in  blank,  registered 
and  countersigned  as  hereinafter  provided,  e<|ual  in  amount  to  uini-ty 
per  centum  of  the  current  market-value  of  the  United  States  bonds 
so  transferred  and  delivered,  but  not  exceeding  ninety  per  centum 
of  the  amount  of  the  bonds  at  the  par  value  thereof,  if  bearing  in- 
terest at  a  rate  not  less  than  five  per  centum  per  annum:  Provided, 
That  the  amount  of  circulating  notes  to  be  furnished  to  each  associa- 
tion shall  be  in  proportion  to  its  paid-up  capital,  as  follows,  and  no 
more: 

"First.  To  each  association  whose  capital  does  not  exceed  five  hun- 
dred thousand   dollars,   ninety  per  centum   of   such   capital. 

"Second.  To  each  association  whose  capital  exceeds  five  hundred 
thousand  dollars,  but  does  not  exceed  one  million  of  dollars,  eighty  per 
centum  of  such  capital. 

"Third.  To  each  association  whose  capital  exceeds  one  million  of  dol- 
lars, but  does  not  exceed  three  million  of  dollars,  seventy-five  per 
centum  of  such  capital. 

"Fourth.  To  each  association  whose  capital  exceeds  three  millions 
of  dollars,  sixty  per  centum  of  such  capital." 

It  was  repealed  by  Act  .luly  12,  1882,  c.  290,  §  10,  22  Stat.  ICo, 
which  further  provided  as  follows: 

"That  upon  a  deposit  of  bonds  as  described  by  sections  fifty-one 
hundred  and  fifty-nine  and  fifty-one  hundred  and  sixty,  except  as 
modified  by  section  four  of  an  act  entitled  'An  act  fixing  the  amount 
of  United  States  notes^  providing  for  a  redistribution  of  the  national- 
bank  currency,  and  for  other  purposes,'  approved  June  twentieth, 
eighteen  hundred  and  seventy-four,  and  as  modified  by  section  eight, 
of  this  act,  the  association  making  the  same  shall  be  entitled  to  re- 
ceive from  the  Comptroller  of  the  Currency  circulating  notes  of  dif- 
ferent denominations,  in  blank,  registered  and  countersigned  as  pro- 
vided by  law,  equal  in  amount  to  ninety  per  centum  of  the  current 
market  value,  not  exceeding  par,  of  the  United  States  bonds  so 
transferred  and  delivered,  and  at  no  time  shall  the  total  amount  of 
such  notes  issued  to  any  such  association  exceed  ninety  per  centum 
of  the  amount  at  such  time  actually  paid  in  of  its  capital  stock." 
,  The  repealing  section  is  superseded  by  Act  March  14,  11)00,  c.  41,  § 
12,  set  forth  below,  which  prescribes  the  manner  in  which  circulating 
notes  may  be  issued. 

ACT  MARCH  14,   1900,  c.  41,  §  12. 

Delivery  of  circulating  notes. — That  upon  the  deposit 
with  the  Treasurer  of  the  United  States,  by  any  national 
banking  association,  of  any  bonds  of  the  United  States  in 


518  APPENDIX 

the  manner  provided  by  existing  law,  such  association  shall 
be  entitled  to  receive  from  the  Comptroller  of  the  Cur- 
rency circulating-  notes  in  blank,  registered  and  counter- 
signed as  provided  by  law,  equal  in  amount  to  the  par 
value  of  the  bonds  so  deposited ;  and  any  national  banking 
association  now  having  bonds  on  deposit  for  the  security 
of  circulating  notes,  and  upon  which  an  amount  of  circulat- 
ing notes  has  been  issued  less  than  the  par  value  of  the 
bonds,  shall  be  entitled,  upon  due  application  to  the  Comp- 
troller of  the  Currency,  to  receive  additional  circulating 
notes  in  blank  to  an  amount  which  will  increase  the  circu- 
lating notes  held  by  such  association  to  the  par  value  of  the 
bonds  deposited,  such  additional  notes  to  be  held  and 
treated  in  the  same  way  as  circulating  notes  of  national 
banking  associations  heretofore  issued,  and  subject  to  all 
the  provisions  of  law  affecting  such  notes :  Provided,  That 
nothing  herein  contained  shall  be  construed  to  modify  or 
repeal  the  provisions  of  section  fifty-one  hundred  and  sixty- 
seven  of  the  Revised  Statutes  of  the  United  States,  author- 
izing the  Comptroller  of  the  Currency  to  require  additional 
deposits  of  bonds  or  of  lawful  money  in  case  the  market 
value  of  the  bonds  held  to  secure  the  circulating  notes 
shall  fall  below  the  par  value  of  the  circulating  notes  out- 
standing for  which  such  bonds  may  be  deposited  as  secu- 
rity:  And  provided  further,  That  the  circulating  notes  fur- 
nished to  national  banking  associations  under  the  provi- 
sions of  this  Act  shall  be  of  the  denominations  prescribed 
by  law,  except  that  no  national  banking  association  shall, 
after  the  passage  of  this  Act,  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency,  or  to  issue  or  reissue  or  place 
in  circulation,  more  than  one-third  in  amount  of  its  cir- 
culating notes  of  the  denomination  of  five  dollars:  And  pro- 
vided further.  That  the  total  amount  of  such  notes  issued 
to  any  such  association  may  equal  at  any  time  but  shall 
not  exceed  the  amount  at  such  time  of  its  capital  stock 
actually  paid  in:  And  provided  further.  That  under  reg- 
ulations to  be  prescribed  by  the  Secretary  of  the  Treas- 
ury any  national  banking  association  may  substitute  the 
two  per  centum  bonds  issued  under  the  provisions  of  this 
Act  for  any  of  the  bonds  deposited  with  the  Treasurer  to 
secure  circulation  or  to  secure  deposits  of  public  money ; 
and  so  much  of  an  Act  entitled  "An  Act  to  enal)le  national 
banking  associations  to   extend  their  corporate   existence, 


ACTS  or  co.N(;iu:ss  oil) 

and  for  other  purposes,"  approved  July  twelfth,  cii;iitcen 
hundred  and  eighty-two,  as  prohibits  any  national  l)ank 
which  makes  any  deposit  of  lawful  money  in  order*to  with- 
draw- its  circulating:  notes  from  receiving-  any  increase  of 
its  circulation  for  the  period  of  six  months  from  the  time 
it  made  such  deposit  of  lawful  money  for  the  purpose  afore- 
said, is  hereby  repealed,  and  all  other  Acts  or  parts  of  Acts 
inconsistent  with  the  provisions  of  this  section  are  hereby 
repealed. 

Act  March  14,   1000,   c.  41,  §   12.  ?A  Stat.   49. 

This  section  is  part  of  an  act  to  define  and  fix  the  standard  of  vahie. 
to  maintain  the  parity  of  all  forms  of  money,  etc.,  >other  sections  of 
which  arc  set  forth  or  referrcMl  to,  under  Kev.  St.  §  3520  (Comp.  St. 
likOl,  p.  2356).  It  supersedes  Act  July  12.  18S2,  c.  290,  §  10.  22 
Stat.  1G5,  which  repealed  Kev.  St.  §  5171,  and  provided  a  substitute 
therefor.  It  also  supersedes  so  much  of  section  8  of  said  act.  ante, 
following  Kev.  St.  S  51G7.  as  limits  the  circulation  of  banks  having  a 
capital  of  $150,000,  or  less,  to  ninety  per  centum  of  the  bonds  de- 
posited. 

The  denominations  of  circulating  notes  are  prescribed  by  Rev.  St. 
§  5172. 

See,  also.  Act  March  4,  1007,  c.  2913,  §  2,  34'  Stat.  1289  (Comp. 
St.  Supp.  1911,  p.  994),  which  contains  a  proviso  "that  nothing  in 
this  act  shall  be  construed  as  affecting  the  right  of  any  national 
bank  to  issue  one-third  in  amount  of  its  circulating  notes  of  the 
denomination  of  five   dollars  as  now  provided   by   law." 

The  two  per  cent,  bonds  mentioned  in  this  section  are  thi>se  au- 
thorized to  be  issued  by  section  11  of  this  act,  ante,  following  Kev. 
St.  §•  3697   (Comp.  St.  1901,  p.  2478). 

The  provisions  of  the  act  referred  to  in  this  section  as  being  re- 
pealed were  contained  in  Act  July  12,  1882,  c.  290,  §  9,  ante,  follow- 
ing Kev.  St.  §  5167.     See  note  under  that  section. 

Sec.  5172.     [Amended.    Act  May  30,  1908,  c.  229,  §  11.] 

This  section,  set  forth  in  Comp.  St.  1901,  p.  3477,  is  amended  by 
Act  May  30,  1908,  c.  229,  §  11,  set  forth  below. 

ACT  MAY  30,  1908,  c.  229,  §   11.     [H.  R.  21871.] 

Amendment  of  I^ev.  St.  §  5172. — That  section  fifty-one 
hundred  and  sevcnt}'-two  of  the  Revised  Statutes  be,  and 
the  same  is  hereby,  amended  to  read  as  follows: 

Printing,  denomination,  and  form  of  the  circulating 
notes;  preparation  and  deposit  for  delivery  of  additional 
circulating  notes. — "Sec.  5172.  In  order  to  furnish  suitable 
notes  lor  circulation,  the  Comptroller  of  the  Currency  shall, 
under  the  direction  of  the  Secretary  of  the  Treasury,  cause 
plates  and  dies  to  be  engraved,  in  the  best  manner  to  guard 
against  counterfeiting  and  fraudulent  alterations,  and  shall 


520  APPENDIX 

have  printed  therefrom,  and  numbered,  such  quantity  of 
circulating  notes,  in  blank,  of  the  denominations  of  five  dol- 
lars, ten  dollars,  twentv  dollars,  fifty  dollars,  one  hundred 
dollars,  five  hundred  dollars,  one  thousand  dollars,  and  ten 
thousand  dollars,  as  may  be  required  to  supply  the  asso- 
ciations entitled  to  receive  the  same.  Such  notes  shall  state 
upon  their  face  that  they  are  secured  by  United  States 
bonds  or  other  securities,  certified  by  the  written  or  en- 
graved signatures  of  the  Treasurer  and  Register  and  by 
?he  imprint  of  the  seal  of  the  Treasury.  They  shall  also 
express  upon  their  face  the  promise  of  the  association  re- 
ceiving the  same  to  pay  on  demand,  attested  by  the  signa- 
ture of  the  president  or  vice-president  and  cashier.  The 
Comptroller  of  the  Currency,  acting  under  the  direction  of 
the  Secretary  of  the  Treasury,  shall  as  soon  as  practicable 
cause  to  be  prepared  circulating  notes  in  blank,  registered 
and  countersigned,  as  provided  by  law,  to  an  amount  equal 
to  fifty  per  centum  of  the  capital  stock  of  each  national 
banking  association;  such  notes  to  be  deposited  in  the 
Treasury  or  in  thie  subtreasury  of  the  United  States  nearest 
the  place  of  business  of  each  association,  and  to  be  held 
tor  such  association,  subject  to  the  order  of  the  Comptroller 
of  the  Currency,  for  their  delivery  as  provided  by  law: 
Provided,  That  the  Comptroller  of  the  Currency  may  issue 
national  bank  notes  of  the  present  form  until  plates  can 
be  prepared  and  circulating  notes  issued  as  above  provided : 
Provided,  however,  That  in  no  event  shall  bank  notes  of 
th'e  present  form  be  issued  to  any  bank  as  additional  circu- 
lation provided  for  by  this  Act." 

Act  May  30,  1908,  c.  229,  §  11,  35  Stat.  551. 

This  section  is  part  of  an  act  to  amend  the  national  banking  laws, 
cited  above,  the  other  sections  of  which  are  set  forth  or  referred  to 
ante,  under  Rev.  St.  §  51G7. 

The  amendment  by  this  section  consists  in  the  omission,  in  the 
enumeration  of  the  denominations  of  circulating  notes',  of  the  words 
"one  dollar,  two  dollars,  three  dollar^,"  and  the  insertion  of  the 
words  "ten  thousand  dollars,"  with  some  changes  in  the  language  of 
the  clauses  prescribing  the  form  and  contents  of  the  notes,  and  in 
the  addition,  at  the  end  of  the  section  as  originally  enacted,  of  the 
provisions  relating  to  the  preparation,  etc.,  of  the  additional  circulat- 
ing notes  authorized  by  preceding  sections  of  this  act,  from  the  words 
"The  Comptroller  of  the  Currency,  acting  under  the  direction  of  the 
Secretary  of  the  Treasury,"  etc.,  to  the  end  of  the  section  as  set 
forth  here. 

The  charter-number  of  each  banking  association   is   required  to   be 


ACTS  OF  CONGRKSS  521 

printed  on  each  circulating  note  Issued,  by  Act  Juno  20.  1874,  c.  VA'.i, 
§  5,  set  fortli  below. 

The  paper  used  in  printing  United  States  notes  is  required  to  be 
used  in  printing  the  circulating  notes,  by  Act  March  3,  1875,  c.  130, 
§  1,   set   forth   below.  .:'*^ 

Circulating  notes  issued  to  banks  after  their  period  of  corporate 
succession  has  been  extended  are  required  to  be  so  printed  as  to  be 
distinguishable  from  those  issued  before  said  extension,  by  Act  Julv 
12,  1SS2.  c.  290,  §  6,  ante,  following  Rey.  St.  §  .'illiG. 

Provisions  defining  and  punishing  the  forging  and  uttering  of  cir- 
culating notes  are  contained  in  Act  March  4,  1909,  c.  321,  §  149,  post, 
p.  572. 

Provisions  defining  and  punishing  the  trafficking  in  forged  notes  are 
contained  in  Act  March  4,   1909,  c.  321,  §  154,  post,  p.  575. 

ACT  JUNE  20,  1874,  c.  343,  §  5. 

Charter-numbers  to  be  printed  on  notes. — That  the 
Comptroller  of  the  Currency  shall,  under  such  rules  and 
regulations  as  the  Secretary  of  the  Treasury  may  prescribe, 
cause  the  charter-numbers  of  the  association  to  be  printed 
upon  all  national-bank  notes  which  may  be  hereafter  is- 
sued by  him. 

Act  June  20.  1874.  c.  343,  §  5.  18  Stat.  124. 

This  section  is  part  of  an  act  fixing  the  amount  of  United  State.s 
rotes,  providing  for  a  redistribution  of  the  national  bank  currency, 
etc.,   other  sections  of  which  are  set  forth  or  referred  to  post,  under 

Rev.  St.  §  5192. 

ACT  MARCH  3,  1875,  c.   130,  §  1. 

Distinctive  paper  for  printing  notes. —     *     *     That  the 
national-bank  notes  shall  be  printed  tinder  the  direction  of 
the    Secretary   of  th.e   Treasury,  and   upon   the   distinctive 
or  special  paper  which  has  been,  or  may  hereafter  be,  adop* 
ed  by  him  for  printing  Uhited  States  notes. 

Act  March  3,  1875.  c.  130.  §  1,  18  Stat.  372. 

This  is  a  proviso  of  the  sundry  civil  appropriation  act  for  the  fiscal 
year   ending  June   30.   1876,  cited   above. 

Sec.  5173.  Plates  and  dies  to  be  under  control  of  Comp- 
troller.— The  plates  and  special  dies  to  be  procured  by  the 
Comptroller  of  the  Currency  for  the  printing  of  such  cir- 
culating notes  shall  remain  under  his  control  and  direction, 
and  the  expenses  necessarily  incurred  in  executing  the  laws 
respecting  the  procuring  of  such  notes,  and  all  other  ex-^ 
penses  of  the  Bureau  of  the  Currency,  shall  be  paid  out 
of  the  proceeds  of  the  taxes  or  duties  assessed  and  col- 


522  APPENDIX 

lected  on  the  circulation  of  national  banking  associations 
under  this  Title. 

Act  June  3,  lSti4.  c.  106,  §  41,  13  Stat.  111. 

Provisions  requiring  banks  to  reimburse  the  Treasury  for  the  cost 
of  engraving  plates  ordered  by  them  are  contained  in  Act  June  20, 
1874,  c.  343,  §  3,  post,  following  Rev.  St.  §  3192. 

Provisions  requiring  banks  to  pay  the  cost  of  making  plates  for 
their  new  notes  in  case  they  extend  their  corporate  succession  are 
contained  in  Act  July  12,*1SS2,  c.  290,  §  0,  ante,  following  Rev.  St.  § 
5136. 

Sec.  5174.  [As  amended  1877.]  Annual  examination  of 
plates,  dies,  etc. — The  Comptroller  of  the  Currency  shall 
cause  to  be  examined,  each  year,  the  plates,  dies,  b*ed-pieces, 
and  other  material  from  which  the  national-bank  circulation 
is  printed,  in  whole  or  in  part,  and  file  in  his  Otifice  an- 
nually a  correct  list  of  the  same.  Such  material  as  shall 
have  been  used  in  the  printing  of  the  notes  of  associations 
which  are  in  liquidation,  or  have  closed  business,  shall  be 
destroyed  under  such  regulations  as  shall  be  prescribed  by 
the  Comptroller  of  the  Currency  and  approved  by  the  Sec- 
retary of  the  Treasury.  The  expenses  of  any  such  exam- 
ination or  destruction  shall  be  paid  out  of  any  appropria- 
tion made  by  Congress  for  the  special  examination  of  na- 
tional banks  and  bank-note  plates. 

Act  March  3.  1873,  c.  269,  §  4,  17  Stat.  603.     Act  Feb.  27,  1877,  c. 

69,   19   Stat.   252. 
This   section  is  amended  by  Act  Feb.  27,  1877,  c.  69,  cited  above, 

by   striking  out,   after   the   words   "the  plates,   dies,"   the   words    "but 

pieces,"  and  substituting  therefor  the  word  "bed-pieces,"  as  set  forth 

here. 

Sec.  5175.-  Limit  to  issue  of  notes  under  five  dollars. — 

Not  more  than  one-sixth  part  of  the  notes  furnished  to 
any  association  shall  be  of  a  less  denomination  than  five 
dollars.  After  specie  payments  are  resumed  no  association 
shall  be  furnished  with  notes  of  a  less  denomination  than 
five  dollars. 

Act  June  3,  1864,  c.  100,  §  22,  13  Stat.  105. 

Provisions  relating  to  the  limit  of  the  issuance  of  circulating  notes 
of  the  denomination  of  five  dollars  are  contained  in  .^ct  March  14, 
1900,  c.  4l,  §  12,  ante,   following  Rev.  St.   §  5171. 

Sec.  5176.     [Repealed.     Act  July  12,  1882,  c.  290,  §  10.] 
This   section,   as  originally   enacted,  was  as  follows: 
"No  banking  association  organized  subsequent  to  the  twelfth  day  of 

July,  eighteen  hundred  and  seventy,  shall  have  a  circulation  in  excess 

of  five  hundred  thousand  dollars." 
It  was  repealed  by  Act  July  12,  1882,  c.  290,  §  10.  which  enacted 


ACTS  OF  CONGUESS  523 

a  substitute  for  Kcv.  St.  §  5171,  which  in  turn  was  supers.. l.-d  l.v  Act 
March  14,  I'.tdO,  c.  41,  §  12.  ante,  following  Uev.  St.  §  5171.  '  See, 
also,   note  under  said  section   5171. 

Sec.  5177.     [Repealed.    Act  Jan.  14,  1875,  c.tS,  §  3.] 

This  section,  as  originally  enacted,  provided  that  the  Jmgregate 
amount  of  circulatins  notes  issued  under  Act  Feb.  25,  ISC'?,  c.  58, 
'  12  Stat.  665,  Act  June  3,  1864,  c.  106,  1.3  Stat.  99,  Act  July  12. 
1870,  c.  252,  §  1,  16  Stat.  251,  and  this  Title,  should  not  exceed 
$354,000,000.  It  is  repealed  by  Act  Jan,  14,  1875,  c.  15,  §  3,  set  forth 
below. 

ACT  JAN.  14,  1875,  c.  15,  §  3. 

Aggregate  amount  of  circulating  notes  not  limited. — That 
section  five  thousand  one  hundred  and  seventy-seven  of  the 
■Revised  Statutes  of  the  United  States,  limiting  the  aggre- 
gate amount  of  circulating-notes  of  national  banking-asso- 
riations,  be,  and  is  hereby,  repealed;  and  each  existing 
banking-association  may  increase  its  circulating-notes  in 
accordance  with  existing  law  without  respect  to  said  aggre- 
gate limit;  and  new  banking-associations  may  be  organ- 
ized in  accordance  with  e::i'^ting  law  without  respect  to  said 
aggregate  limit;  and  the  provision'?  of  law  for  the  with- 
drawal and  redistribution  of  national  bank  currency  among 
the  several  States  and  Territories  are  hereby  repealed. 
*  *  [Part  of  section  omitted  relates  in  part  to  redemp- 
tion of  legal  tender  notes,  and  remainder  is  superseded. 
Act  May  31,  1878,  c.  146.] 

Act  Jan.  14,  1875,  c.  15,  §  3,  18  Stat.  206. 

This  section  is  part  of  an  act  providing  for  the  resumption  of  specie 
payments,  other  sections  of  which  are  set  forth  or  referred  to  follow- 
ing Rev.  St.  §  3575  (Comp.  St.  1901,  p.  2389).  It  repeals  Rev.  St. 
§   5177. 

Part  of  that  portion  of  the  section  omitted  here  relates  to  the  re- 
demption of  legal-tender  notes,  and  the  issue  and  sale  of  bonds,  and  is 
set  forth  following  Rev.  St.  §  3575   (Comp.  St.  1901,  p.  2389). 

The  other  part  of  the  omitted  portion  is  superseded  bv  Act  Ma.v 
31,  1878,  c.  146,  set  forth  following  Rev.  St.  §  3582  (Comp.  St.  1901, 
p.  2397).  It  provided  that  "whenever,  and  so  often,  as  circulating 
notes  shall  be  issued  to  any  such  banking  association,  so  increasing 
its  capital  or  circulating  notes,  or  so  newly  organized  as  aforesaid, 
it  shall  be  the  duty  of  the  Secretary  of  the  Treasury  to  redeem  the 
legal-tender  United  States  notes  in  excess  only  of  three  hundred 
million  of  dollars,  to  the  amount  of  eighty  per  centum  of  the  sum  of 
national  bank  notes  so  issued  to  any  such  banking  association  as 
aforesaid,  and  to  continue  such  redemption  as  such  circulating  notes 
are  issued  uutil  there  shall  be  outsti>nding  the  sum  of  three  hundred 
million    d(  ihirs    of   such    legal    tender    United    States    notes,    and    no 


)24  APPENDIX 

more."     The   superseding  act   prohibits    the   further   cancellation   and 
retirement  of  United  States  legal  tender  notes. 

Kev.  St.  §§  5178,  5179,  51S0,  and  5181,  and  Act  June  20,  1874,  c. 
343,  §§  7,  8,  9,  are  also  superseded  by  this  section.  See  notes  under 
those  sections,  and  also  note  under  said  sections  7,  8,  and  9,  post, 
under  Rev.  St  §  5192. 

Sec.  5178.  [Superseded.  Act  Jan.  14,  1875,  c.  15,  §  3.] 
This  section,  as  originally  enacted,  was  as  follows: 
"One  hundred  and  iifty  millions  of  dollars  of  the  entire  amount  of 
circulating  notes  authorized  to  be  issued  shall  be  apportioned  to 
associations  in  the  States,  in  the  Territories,  and  in  the  District  of 
Columbia,  according  to  representative  population.  One  hundred  and 
fifty  millions  shall  be  apportioned  by  the  Secretary  of  the  Treasury 
among  associations  formed  in  the  several  States,  in  the  Territories, 
and  in  the  District  of  Columbia,  having  due  regard  to  the  existing 
banking  capital,  resources,  and  business  of  such  States,  Territories, 
and  District.  The  remaining  fifty-four  millions  shall  be  apportioned 
among  associations  in  States  and  Territories  having,  under  the  ap- 
portionments above  prescribed,  less  than  their  full  proportion  of  the 
aggregate  amount  of  notes  authorized,  which  made  due  application 
for  circulating  notes  prior  to  the  twelfth  day  of  July,  eighteen  hun- 
dred and  seventy-one.  Any  remainder  of  such  fifty-four  millions 
shall  be  issued  to  banking  associations  applying  for  circulating  notes 
in   other  States  or  Territories  having  less  than   their  proportion." 

It  is  superseded  by  Act  Jan.  14,  1875,  c.  15,  §  3.  ante,  under  Rev. 
St.  §  5177.  See  note  under  said  superseding  section,  and  also  note 
under  Act  June  20,  1874,  c.  343,  §§  7,  8,  9,  post,  under  Rev.  St.  § 
5192. 

.  Sec.  5179.  [Superseded.  Act  Jan.  14,  1875,  c.  15,  §  3.] 
This  section,  as  originally  enacted,  was  as  follows: 
"In  order  to  secure  a  more  equitable  distribution  of  the  national 
hanking  currency,  there  may  be  issued  circulating  notes  to  banking 
associations  organized  in  States  and  Territories  having  less  than 
their  proportion,  and  the  amount  of  circulation  herein  authorized 
shall,  under  the  direction  of  the  Secretary  of  the  Treasury,  as  it  may 
be  required  for  this  purpose,  be  withdrawn,  as  herein  provided,  from 
banking  associations  organized  in  States  having  more  than  their 
proportion,  but  the  amount  so  withdrawn  shall  not  exceed  twenty-five 
million  dollars:  Provided,  That  no  circulation  shall  be  withdrawn 
under  the  provisions  of  this  section  until  after  the  fifty-four  millions 
granted  in  the  first  section  of  the  act  of  July  twelfth,  eighteen  hun- 
dred and   seventy,   shall  have   been   taken  up." 

It  is  superseded  by  Act  Jan.  14,  1875,  c.  15,  §  3,  ante,  under  Rev. 
St  §  5177.  See  note  under  said  superseding  section,  and  also  note 
under  Act  June  20,  1874,  c.  343,  §§  7,  8,  9,  post,  under  Rev.  St.  § 
5192. 

Sec.  5180.     [Repealed.     Act  Jan.  14,  1875,  c.  15,  §  3.] 

This  section,  as  originally   enacted,  was  as  follows: 
"The  Comptroller  of  the  Currency  shall,  under  the  direction  of  the 
Secretary  of  the  Treasury,  make  a  statement  showing  the  amount  of 


ACTS  OF  CONOUESS  525 

circulation  in  each  State  and  Territory,  and  the  amount  necessary  to 
be  withdrawn  from  each  association,  and  shall  forthwith  make  a  requi- 
sition for  such  amount  upon  such  associations,  commencing  with  those 
having  a  circulation  exceeding  one  million  of  dollars,  in  jji^tes  having 
an  excess  of  circulation,  and  withdrawing  their  circulation  in  excess  of 
one  million  of  dollars,  and  then  proceeding  proportionately  with  other 
associations  having  a  circulation  exceeding  three  hundred  thousand 
dollars,  in  States  having  the  largest  excess  of  circulation,  and  reducing 
the  circulation  of  such  associations  in  States  having  the  greatest  pro- 
portion in  excess,  leaving  undisturbed  the  associations  in  States  having 
a  smaller  proportion,  until  those  in  greater  excess  have  been  reduced 
to  the  same  grade,  and  continuing  thus  to  make  such  reductions  until 
the  full  amount  of  twenty-five  millions  has  been  withdrawn;  and  the 
circulation  so  withdrawn  shall  be  distributed  among  the  States  and 
Territories  having  less  than  their  proportion,  so  as  to  equalize  the 
same.  Upon  failure  of  any  association  to  return  the  amount  of  circu- 
latinu-  notes  so  required,  within  one  year,  the  Comptroller  shall  sell  at 
public  auction,  having  given  twenty  days'  notice  thereof  in  one  daily 
newspaper  printed  in  Washington  and  one  in  New  York  City,  an 
amount  of  the  bonds  deposited  by  that  association  as  security  for  its 
cii'culation,  equal  to  the  circulation  required  to  be  withdrawn  from  the 
association  and  not  returned  in  compliance  with  such  requisition;  and 
he  shall,  with  the  proceeds,  redeem  so  many  of  the  notes  of  such  as- 
sociation, as  they  come  into  the  Treasury,  as  will  equal  the  amount  re- 
quired and  not  returned;  and  shall  pay  the  balance,  if  any,  to  the  as- 
sociation." 

It  is  repealed  by  Act  Jan.  14,  1875,  c.  15,  §  3,  ante,  under  Rev.  St.  § 
5177.  See  note  under  said  repealing  section,  and  also  note  under  Act 
June  20.  1874,  c.  343,  §§  7,  8,  9,  post,  under  Rev.  St.  §  5192. 

Sec.  5181.     [Superseded.     Act  Jan.  14,  1875,  c.  15,  §  3.] 

This  section,  as  originally  enacted,  was  as  follows: 
"Any  association  located  in  any  State  having  more  than  its  propor- 
tion of  circulation  may  be  removed  to  any  State  having  less  than  its 
proportion  of  circulation,  under  such  rules  and  regulations  as  the 
Comptroller  of  the  currency,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  prescribe:  Provided,  That  the  amount  of  the  issue  of 
said  banks  shall  not  be  deducted  from  the  issue  of  fifty-four  millions 
mentioned  in  section  five  thousand  one  hundred  and  seventy-eight." 

It  is  superseded  by  Act  Jan.-  14,  1875,  c.  15,  §  3,  ante,  undei-  Rev. 
St.  §  5177.     See  note  under  said  superseding  section. 

Sec.  5182.  For  what  demands  national  bank  notes  may 
be  received. — After  any  association  receiving  circulating 
notes  under  this  Title  has  caused  its  promise  to  pay  such 
notes  on  demand  to  be  signed  by  the  president  or  vice- 
president  and  cashier  thereof,  in  such  manner  ,as  to  make 
them  obligatory  promissory  notes,  payable  on  demand,  at 
its  place  of  business,  such  association  may  issue  and  cir- 
culate the  same  as  money.  And  the  same  shall  be  received 
at  par  in  all  parts  of  the  United  States  in  payment  of  taxes, 
excises, -public  lands,  and  all  other  dues  to  the  United  States, 


526  APPENDIX 

except  duties  on  imports;  and  also  for  all  salaries  and  other 
debts  and  demands  owing  by  the  United  States  to  indi- 
viduals, corporations,  and  associations  within  the  United 
States,  except  interest  on  the  public  debt,  and  in  redemp- 
tion of  the  national  currency. 

Act  June  3.  1SG4,  c.  106.  §  23,  13  Stat.  lOG. 

National  bank  notes  shall  be  received  at  par  for  debts  and  demands 
owing  by  the  United  States,  with  certain  exceptions,  ante,  Rev.  St.  § 
8475.^ 

I'rovisions  requiring  the  redemption  of  lost  or  stolen  notes  put  in 
circulation  without  the  signature  or  upon  the  forged  signature  of  the 
proper  officers  are  contained  in  Act  July  28,  1892,  c.  317,  post,  follow- 
ing Rev.  St.  §  5192. 

Sec.  5183.  [As  aniepded  1875.]  Issue  of  other  notes 
prohibited. — No  national  banking  association  shall  issue 
post  notes  or  any  other  notes  to  circulate  as  money  than 
such  as  are  authorized  by  the  provisions  of  this  Title. 

Act  June  3,  1864,  c.  106,  §  23,  13  Stat.  106.  Act.  Feb.  18,  1875,  c. 
80.  18  Stat.  320. 

This  section  is  amended  by  Act  Feb.  18,  1875,  c.  80,  cited  above,  by 
adding,  after  the  words  "shall  issue,"  the  words  "post  notes  or,"  as 
set  forth  here. 

Sec.  5184.  Destroying  and  replacing  worn-out  and  mu- 
tilated notes. — It  shall  be  the  duty  of  the  Comptroller  of 
the  Currency  to  receive  worn-out  or  mutilated  circulating 
notes  issued  by  any  banking  association,  and  also,  on  due 
proof  of  the  destruction  of  any  such  circulating  notes,  to 
deliver  in  place  thereof  to  the  association  other  blank  cir- 
culating notes  to  an  equal  amount.  Such  worn-out  or  mu- 
tilated notes,  after  a  memorandum  has  been  entered  in  the 
proper  books,  in  accordance  with  such  regulations  as  may 
be  established  by  the  Comptroller,  as  well  as  all  circulating 
notes  which  shall  have  been  paid  or  surrendered  to  be  can- 
celed, shall  be  burned  to  ashes  in  presence  of  four  persons, 
one  to  be  appointed  by  the  Secretary  of  the  Treasury,  one 
by  the  Comptroller  of  the  Currency,  one  by  the  Treasurer 
of  the  United  States,  and  one  by  the  association,  under 
such  regulations  as  the  Secretary  of  the  Treasury  may  pre- 
scribe. A  certificate  of  such  burning,  signed  by  the  par- 
ties so  appointed,  shall  be  made  in  the  books  of  the  Comp- 
troller, and  a  duplicate  thereof  forwarded  to  the  association 
whose  notes  are  thus  canceled. 

Act  June  3,  1804,  c.  106,  §  24.  13  Stat.  106. 

Provisions  relating  to  the  destruction  of  national  bank  notes  by  mac- 
eration, and  repealing  so  much  of  this  section  as  requires  snch  notes 


ACTS   OF  COXGRKSS  527 

to  be  burned,  are  contained  in  Act  June  23,  1S74,  c.  45.J.   §  1,  ante, 
p.  476. 

Sec.  5185.  Organization  of  associations  to  issiue  gold 
notes  authorized. — Associations  may  be  organized  in  the 
manner  prescribed  by  this  Title  for  the  purpose  of  issuing 
notes  payable  in  gold;  and  upon  the  deposit  of  any  United 
States  bonds  bearing  interest  payable  in  gold  with  the 
Treasurer  of  the  United  States,  in  the  manner  prescribed 
for  other  "associations,  it  shall  be  lawful  for  the  Comptrol- 
ler of  the  Currency  to  issue  to  the  association  making  the 
deposit  circulating  notes  of  different  denominations,  but 
none  of  them  of  less  than  five  dollars,  and  not  exceeding  in 
amount  eighty  per  centum  of  the  par  value  of  the  bonds 
deposited,  which  shall  express  the  promise  of  the  associa- 
tion to  pay  them,  upon  presentation  at  the  office  at  which 
they  are  issued,  in  gold  coin. of  the  United  States,  and  shall 
be  so  redeemable.  But  no  such  association  shall  have  a 
circulation  of  more  than  one  million  of  dollars.' 
Act  July  12,  1870,  c.  282,  §  3,  16  Stat.  252. 

Provisions  relating  to  the  removal  of  the  limitation  restricting  the 
circulation  of  hanking  associations  issuing  notes  payable  in  gold  are 
contained  in  Act  Jan.  19,  1875,  c.  19,  set  forth  below. 

Provisions  authorizing  the  conversion  of  national  gold  banks  into 
currency  banks  are  contained  in  Act  Feb.  14,  1880,  c.  25,  post,  follow- 
ing Rev.  St.  §  5186. 

ACT  JAN.  19,  1875,  c.  19. 

An  Act  to  Remove  the  Limitation  Restricting  the  Cir- 
culation of  Banking-Associations  Issuing  Notes  Pav- 
able  in  Gold.     (18  Stat.  302.) 
Removal  of  limitation  on  circulation  of  gold  banks. — Be 
it  enacted,  &c.,  That  so  much  of  section  five  thousand  one 
hundred   and   eighty-five  of  the   Revised   Statutes   of  the 
United  States  as  limits  the  circulation  of  banking-associa- 
tions, organized  for  the  purpose  of  issuing  notes  payable 
in  gold,  severally  to  one  million  dollars,  be,  and  the  same 
is  hereby,   repealed ;    and  each  of  such   existing  banking- 
associations   may   increase  its  circulating-notes,  and  new 
banking-associations  may  be  organized,  in  accordance  with 
existing  law,  withbut  respect  to  such  limitation. 
Act  Jan.  19,  1875.  c.  19.  IS  Stat.  302. 

Sec.  5186.  Their  lawful  money  reserve,  and  duty  of  re- 
ceiving notes  of  other  associations. — Every  association  or- 
ganized under  the  preceding  section  shall  at  all  times  keep 


;528  APPENDIX 

on  hand  not  less  than  twenty-five  per  centum  of  its  out- 
standing circulation,  in  gold  or  silver  coin  of  the  United 
States;  and  shall  receive  at  par  in  the  payment  of  debts 
the  gold-notes  of  every  other  such  association  which  at 
the  time  of  such  payment  is  redeeming  its  circulating  notes 
in  gold  coin  of  the  United  States,  and  shall  be  subject  to 
all  'the  provisions  of  this  Title :  Provided,  That,  in  apply- 
ing the  same  to  associations  organized  for  issuing  gold- 
notes,  the  terms  "lawful  money"  and  "lawful  mo'ney  of  the 
United  States"  shall  be  construed  to  mean  gold  or  silver 
coin  of  the  United  States ;  and  the  circulation  of  such  asso- 
ciations shall  not  be  within  the  limitation  of  circulation 
mentioned  in  this  Title. 

Act  July  12.  1S70,  c.  282,  §§  3-5,  16  Stat.  252,  253. 

ACT  FEB.  14,   1880,  c.  25. 

An   Act   Authorizing  the   Conversion   of  National   Gold 
Banks.     (21  Stat.  66.) 

Conversion  of  national  gold  banks  into  currency  banks. 
— Be  it  enacted,  &c.,  That  any  national  gold  bank  organized 
under  the  provisions  of  the  law^s  of  the  United  States,  may, 
in  the  manner  and  subject  to  the  provisions  prescribed  by 
section  fifty-one  hundred  and  fifty-four  of  the  Revised  Stat- 
utes' of  the  United  States,  for  the  conversion  of  banks  in- 
corporated under  the  laws  of  any  State,  cease  to  be  a  gold 
bank,  and  become  such  an  association  as  is  authorized  by 
section  fifty-one  hundred  and  thirty-three,  for  carrying  on 
the  business  of  banking,  and  shall  have  the  same  powers 
and  privileges,  and  shall  be  subject  to  the  same  duties, 
responsibilities,  and  rules,  in  all  respects,  as  are  by  law 
prescribed  for  such  associations :  Provided,  That  all  cer- 
tificates of  organization  which  shall  be  issued  under  this 
act  shall  bear  the  date  of  the  original  organization  of  each 
bank  respectively  as  a  gold  bank. 
Act  Feb.  14,  1880,  c.  25,  21  Stat.  6G. 

Sec.  5187.  Penalty  for  issuing  circulating  notes  to  unau- 
thorized associations. — No  officer  acting  under  the  provi- 
sions of  this  Title  shall  countersign  or  deliver  to  any  as- 
sociation, or  to  any  other  company  or  person,  any  circulat- 
ing notes  contemplated  by  this  Title,  except  in  accordance 
with  the  true  intent  and  meaning  of  its  provisions.  Every 
officer  who  violates  this  section  shall  be  deemed  guilty  of 


ACTS  OF   CONGRESS 


520 


a  high  misdemeanor,  and  shall  be  fined  not  more  than 
double  the  amount  so  countersigned  and  delivered,  and  im- 
prisoned not  less  than  one  year  and  not  more  than  fifteen 
years.  "^' 

Act  June  3,  18G4,  c.  106,  §  27,  13  Stat.  107. 

Sees.  5188,  5189.     [Repealed.    Act  March  4,  1909,  c.  321, 
§  341.] 

These  sections,  set  forth  in  Comp.  St.  1901,  p.  3484,  are  incorporat- 
ed in  the  act  to  codify,  etc.,  the  penal  laws.  Act  March  4,  1900,  c.  321, 
in  chapter  7.  §§  175.  176,  post,  p.  .^76.  thereof,  and  are  expressly  re- 
pealed by  chapter  15,  §  341,  of  said  act,  taking  effect  January  1,  1910. 
Said  act  is  set  forth  in  Comp.  St.  Supp.  1911,  under  Title  LXI'XA, 
"Criminal  Code." 

CHAPTER  THREE— REGULATION  OF  THE  BANK- 
ING BUSINESS 


Sec. 

5190.  Place  of  business. 

5191.  "Lawful-money  reserve"  prescrib- 

ed. 
B192.  What  may  be  counted  toward  the 

"lawful-money  reserve." 
Act  June  20,  1874,  c.  343. 

1.  [Relates   to   designation    of    bank- 

ing act.] 

2.  "Lawful-money  reserve"  to  be  de- 

termined by   deposits. 

3.  Reserve   in  Treasury   for   redemp- 

tion   of   circulation;     redemption 
of  circulating  notes. 

4.  [Relates   to   withdrawal    of   circu- 

lating   notes.] 

5.  [Relates  to  printing  of  circulating 

notes.] 

6.  [Relates   to   United   States   notes.] 
7-9.  [Superseded.] 

Act  Marrh  3,  1S75,  c.  130,  §  3. 

Clerical    force    for    redemption    of 
circulating  notes. 
Act  March   3,   1887,  c.  378. 

1.  [As   amended,   Act   March   3,   1903, 

c.     1014.]       Additional     "reserve 
cities  of  25,000  inhabitants." 

2.  Additional  "central  reserve  cities." 

3.  [Amends  Act   Jan.  14,   1875,    c.   15, 

§  3.] 
Act  July  14,  1S90,  c.  708,  §  6. 

Disposition  of  money  deposited  for 
and    redemption     of    circulating 
notes. 
Act  July  2S,  1892,   c.  317. 

Redemption  of  lost   or  stolen  cir- 
culating notes. 

Tiff.Bks.&  B.— 34 


Sec. 

Act  May   30,  1908,   c.  229.  §  12. 

Redemption    by    Treasury    of    cir- 
culating notes  in  lawful  money. 

5193.  [Repealed.] 

5194.  [Superseded.] 

5195.  Place   for  redemption    of  circulat- 

ing notes  to   be  designated. 

5196.  National    banks    to    receive    notes 

of  other  national  banks. 

5197.  Limitation    upon    rate    of    interest 

which   may  be  taken. 

5198.  Consequences    of    taking    usurious 

interest;  [jurisdiction  of  suits 
by  or  against  national  banks.] 

5199.  Dividends. 

5200.  [As    amended.    Act    June   22,    1906, 

c.  3316.]  Limit  to  liabilities 
which  may  be  incurred  by  any 
one  person,   etc. 

5201.  Associations    not    to    loan   or   pur- 

chase their  own  stock. 

5202.  Limit    upon    indebtedness    to    be 

incurred. 

5203.  Restriction   upon    use    of   circulat- 

ing   notes. 

5204.  Prohibition     upon    withdrawal    of 

capital. 

5205.  Enforcing    payment   of    defleieney 

in  capital  stock.  '  „ 

5206.  Restriction   upon   use   of  notes    of 

other  banks. 

5207.  United  States  notes  not  to  be  held 

as   collateral,    etc. ;    penalty. 

5208.  Penalty      for      falsely      certifying 

checks. 


530 


APPENDIX 


Act  July  12,   1882.  c.   290,   §  13. 

Punishment  for  falsely   certifying 
checks,   etc. 
6209.  Embezzlement;     penalty. 

5210.  List   of   shareholders,    etc.,    to   be 

kept. 

5211.  Reports    to     Comptroller     of    the 

Currency. 
Act  Feb.   26,  1881,  c.  82. 

Verification  of  reports. 

5212.  Report  as  to  dividends. 

5213.  Penalty    for   failure   to    make    re- 

ports. 
Act  June  30,   1876,  c.  156,  §  6. 

Reports  of  savings  banks  and  sav- 
ings and  trust  companies. 


Sec. 

5214.  [As  amended,  Act  May  30,  1908,  c. 

229,  §  9.]  Taxes  on  circulating 
notes;  increase  of  rate  on  notes 
secured  otherwise  than  by  bonds 
of  United  States;  monthly  re- 
turns of  amount  of  notes  so  se- 
cured; disposition  of  taxes  there- 
on received. 
Act  March  14,  1900,  c.  41.  §  13. 
Tax   on   circulating   notes. 

5215.  Half-yearly    return  of   circulation, 

deposits,   and   capital  stock. 

5216.  Penalty    for    failure    to    make  re- 

turn. 

5217.  Penalty  for  failure  to  pay  duties. 

5218.  Refunding   excessive  duties. 

5219.  State   taxation. 


Sec.  5190.  Place  of  business. — The  usual  business  of 
each  national  banking  association  shall  be  transacted  at 
an  office  or  banking-house  located  in  the  place  specified  in 
its  organization  certificate. 

Act  June  3,  1SG4,  c.  106,  §  8,  13  Stat.  101. 

Provisions  relating  to  change  of  place  of  business  are  contained  in 
Act  May  1,  1886,  c.  73,  §  2,  ante,  following  Rev.  St.  §  5134. 

Sec.  5191.  "Lawful-money  reserve"  prescribed. — Every 
national  banking  association  in  either  of  the  following  ci- 
ties: Albany,  Baltimore,  Boston,  Cincinnati,  Chicago, 
Cleveland,  Detroit,  Louisville,  Milwaukee,  New  Orleans, 
New  York,  Philadelphia,  Pittsburgh,  Saint  Louis,  San  Fran- 
cisco, and  Washington,  shall  at  all  times  have  on  hand,  in 
lawful  money  of  the  United  States,  an  amount  equal  to  at 
least  twenty-five  per  centum  of  the  aggregate  amount  of 
its  notes  in  circulation  and  its  deposits ;  and  every  other 
"association  shall  at  all  times  have  on  hand,  in  lawful  m.oney 
of  the  United  States,  an  amount  equal  to  at  least  fifteen 
per  centum  of  the  aggregate  amount  of  its  notes  in  circula- 
tion, and  of  its  deposits.  Whenever  the  lawful  money  of 
any  association  in  any  of  the  cities  named  shall  be  below 
the  amount  of  twenty-five  per  centum  of  its  circulation  and 
deposits,  and  whenever  the  lawful  money  of  any  other  as- 
sociation shall  be  below  fifteen  per  centum  of  its  circula- 
tion and  deposits,  such  association  shall  not  increase  its 
liabilities  by  making  any  new  loans  or  discounts  otherwise 
than  by  discounting  or  purchasing  bills  of  exchange  pay- 
able at  sight,  nor  make  any  dividend  of  its  profits  until  the 
required  proportion,  between  the  aggregate  amount  of  its 


ACTS  OF  CONGRESS  531 

outstanding  notes  of  circulation  and  deposits  and  its  law- 
ful money  of  the  United  States,  has  been  restored.  And  the 
Comptroller  of  the  Currency  may  notify  any  a&sociation, 
whose  lawful-money  reserve  shall  be  below  the  amount 
above  required  to  be  kept  on  hand,  to  make  good  such  re- 
serve; and  if  such  association  shall  fail  for  thirty  days 
thereafter  so  to  make  good  its  reserve  of  lawful  money,  the 
Comptroller  may,  with  the  concurrence  of  the  Secretary  of 
the  Treasury,  appoint  a  receiver  to  wind  up  the  business 
of  the  association,  as  provided  in  section  fifty-two  hundred 
and  thirt3'-four. 

Act  June  3,  1864,  c.  lOG,  §  31,  13  Stat.  108.  Act  March  1,  1872,  c. 
22,  17  Stat.  32. 

This  section  is  amended  by  Act  June  20,  1874,  c.  343.  §  2,  post,  fol- 
lowing Rev.  St.  §  5192,  by  providing  that  the  banlsing  associations 
named  shall  not  be  required  to  keep  on  hand  any  amount  of  money 
whatever  by  reason  of  the  amount  of  their  respective  circulations,  but 
that  the  moneys  required  to  be  kept  on  hand  by  said  associations  shall 
be  determined  by  the  amount  of  their  deposits  solely,  as  provided  by 
this  section. 

Upon  application  in  writing  by  three-fourths  of  the  national  banks 
located  in  any  city  having  a  population  of  25.000,  asking  that  the  name 
of  such  city  be  added  to  the  cities  named  in  this  and  the  following  sec- 
tion, the  Comptroller  may  grant  the  application,  and  every  bank  locat- 
ed in  such  city  must  keep  on  hand  the  reserve  fund  required  by  this 
section  in  the  manner  prescribed  herein  and  by  section  SlOn,  by  Act 
March  3,  1887,  c.  378,  §  1,  as  amended  by  Act  March  3,  1903,  c.  1014, 
post,  following  Rev.  St.  §  5192. 

Upon  application  in  writing  by  three-fourths  of  the  national  banks  in 
any  city  having  a  population  of  200,000,  asking  that  such  city  may  be  a 
"central  reserve  city,"'  as  provided  by  Rev.  St.  §  5195,  the  Comptroller 
may  grant  the  applicati'on,  and  every  bank  located  in  such  city  must 
thereupon  have  on  hand  twenty-five  per  cent,  of  its  deposits,  as  pro- 
vided by  this  section,  by  Act  March  3,  1887,  c.  378,  §  2,  post,  follow- 
ing Rev.  St.  §  5192. 

Provisions  relating  to  the  redemption  of  circulating  notes  at  the 
Treasury  are  contained  in  Act  June  20,  1874,  c.  343,  §  3,  Act  March 
3,  1875.  c.  130,  §  3,  Act  July  14,  1890,  c.  708,  §  6,  post,  following  Rev. 
St.  §  5192. 

Provisions  relating  to  the  redemption  of  circulating  notes  of  banks, 
extending  their  period  of  corporate  succession,  issued  prior  to  such  ex- 
tension, are  contained  in  Act  July  12,  1882,  c.  290,  §  6,  ante,  follow- 
ing Rpv.  St.  §  5136. 

Treasury  notes  issued  in  accordance  with  the  provisions  of  Act  July 
14,  1890.  20  Stat.  289  (Comp.  St.  1901,  p.  2354),  may  be  counted  as 
part  of  the  lawful  reserve. 

So,  also,  gold  certificates.  Act  March  2.  1911.  c.  190.  §  1,  36  Stat. 
964  (Comp.  St.  Supp.  1911,  p.  54).  See  also  Act  July  12,  1882.  c. 
290,  §  12.  22  Stat.  165.  and  Act  March  14,  1900,  c.  41,  §  6,  31  Stat.  47 
(Comp.  St.  1901,  pp.  140,  141). 


532  APPEiNDIX 

Sec.  5192.  What  may  be  counted  toward  the  "lawful- 
money  reserve."— Three-fifths  of  the  reserve  of  fifteen  per 
centum  required  by  the  preceding  section  to  be  kept,  may 
consist  of  balances  due  to  an  association,  available  for  the 
redemption  of  its  circulating  notes,  from  associations  ap- 
proved by  the  Comptroller  of  the  Currency,  organized  un- 
der the  act  of  June  three,  eighteen  hundred  and  sixty-four, 
or  under  this  Title,  and  doing  business  in  the  cities  of  Al- 
bany. Baltimore,  Boston,  Charleston,  Chicago,  Cincinnati, 
Cleveland,  Detroit,  Louisville,  Milwaukee,  New  Orleans, 
New  York,  Philadelphia,  Pittsburgh,  Richmond,  Saint 
Louis,  San  Francisco,  and  Washington.  Clearing-house 
certificates,  representing  specie  or  lawful  money  specially 
deposited  for  the  purpose,  of  any  clearing-house  associa- 
tion, shall  also  be  deemed  to  be  lawful  money  in  the  pos- 
session of  any  association  belonging  to  such  clearing-house, 
holding  and  owning  such  certificate,  within  the  preceding 
section. 

Act  June  3,  1804,  c.  lOG,  §  31,  13  Stat.  lOS. 

Seo  note  under  Rev.  St.  §  5191. 

ACT  JUNE  20,  1874,  c.  343. 

An  Act  Fixing  the  Amount  of  United  States  Notes,  Pro- 
viding for  a  Redistribution  of  the  National-Bank  Cur- 
rency, and  for  Other  Purposes.     (18  Stat.  123.) 

Be  it  enacted,  etc.,  [Sec.  1.  Relates  to  designation  of 
banking  act.] 

This  section  provides  that  Act  June  3,  1864,  c.  106,  shall  be  desig- 
nated as  the  "national  bank  act,"  and  is  set  forth  ante,  following  Rev. 
St.  §  5133. 

"Lawful-money  reserve"  to  be  determined  by  deposits. — 
Sec.  2.  That  section  thirty  one  of  the  "the  national-bank 
act"  be  so  amended  that  the  several  associations  thereir 
provided  for  shall  not  hereafter  be  required  to  keep  on 
hand  any  amount  of  money  whatever,  by  reason  of  the 
amount  of  their  respective  circulations;  but  the  moneys 
required  by  said  section  to  be  kept  at  all  times  on  hand 
shall  be  determined  by  the  amount  of  deposits  in  all  re- 
spects, as  provided  for  in  the  said  section. 

Act  June  20,  1874,  c.  .343,  §  2,  18  Stat.  123. 

Section  31  of  the  "national-bank  act,"  mentioned  in  this  section,  is 
incorporated  into  Rev.  St.  §§  5191,  5192, 


ACTS   OF   CONGRESS  533 

Reserve  in  Treasury  for  redemption  of  circulation ;  re- 
demption of  circulating  notes.— .Sec.  3,  That  every  asso- 
ciation org-anized,  or  to  be  organized,  under  thej^rovisions 
of  the  said  act,  and  of  the  several  acts  amendatory  thereof, 
shall  at  all  times  keep  and  have  on  deposit  in  the  Treasury 
of  the  United  States,  in  lawful  money  of  the  United  States, 
a  sum  equal  to  five  per  centum  of  its  circulation,  to  be  held 
and  used  for  the  redemption  of  such  circulation ;  which 
sum  shall  be  counted  as  a  part  of  its  lawful  reserve,  as 
provided  in  section  two  of  this  act ;  and  when  the  circulat- 
ing" notes  of  any  such  associations,  assorted  or  unassorted, 
shall  be  presented  for  redemption,  in  sums  of  one  thousand 
dollars,  or  any  multiple  thereof,  to  the  Treasurer  of  the 
United*  States,  the  same  shall  be  redeemed  in  United  States 
notes.  All  notes  so  redeemed  shall  be  charged'  by  the 
Treasurer  of  the  United  States  to  the  respective  associa- 
tions issuing  the  same,  and  he  shall  notify  them  severally, 
on  the  first  day  of  each  month,  or  oftener,  at  his  discretion, 
of  the  amount  of  such  redemptions;  and  whenever  such 
redemptions  for  any  association  shall  amount  to  the  sum 
of  five  hundred  dollars,  such  association  so  notified  shall 
forthwith  deposit  with  the  Treasurer  of  the  United  States 
a  sum  in  United  States  notes  equal  to  the  amount  of  its 
circulating-notes  so  redeemed.  And  all  notes  of  national 
l)anks  worn,  defaced,  mutilated,  or  otherwise  unfit  for  cir- 
culation shall,  when  received  by  any  assistant  treasurer  or 
at  any  designated  depository  of  the  United  States,  be  for- 
warded to  the  Treasurer  of  the  United  States  for  redemp- 
tion as  provided  herein.  And  when  such  redemptions  have 
been  so  reimbursed,  the  circulating-notes  so  redeemed  shall 
be  forwarded  to  the  respective  associations  by  which  they 
were  issued ;  but  if  any  of  such  notes  are  worn,  mutilated, 
defaced,  or  rendered  otherwise  unfit  for  use,  they  shall  be 
forwarded  to  the  Comptroller  of  the  Currency  and  destroy- 
ed and  replaced  as  now  provided  by  law :  Provided,  That 
each  of  said  associations  shall  re-imburse  to  the  Treasury 
the  charges  for  transportation,  and  the  costs  for  assorting 
such  notes;  and  the  associations  hereafter  organized  shall 
a\lso  severally  re-imburse  to  the  Treasury  the  cost  of  en- 
graving such  plates  as  shall  be  ordered  by  each  association 
respectively ;  and  the  amount  assessed  upon  each  associa- 
tion shall  be  in  proportion  to  the  circulation  redeemed,  and 
be  charged  to  the   fund  on   deposit  with   the  Treasurer: 


534  APPENDIX 

And  provided  further,  That  so  much  of  section  thirty-two 
of  said  national-bank  act  requiring  or  permitting  the  re- 
demption of  its  circulating  notes  elsewhere  than  at  its  own 
counter,  except  as  provided  for  in  this 'section,  is  hereby 
repealed. 

Act  June  20,  1874,  c.  343,  §  3,  18  Stat.  123. 

The  provisions  of  section  32  of  the  "national-bank  act,"  mentioned  in 
this  section,  are  incorporated  into  Rev.  St.  §■  5195. 

-The  manner  of  destroying  circulating  notes  is  prescribed  bj'  Act  June 
23.  1874.  c.  455.  ante,  p.  476. 

Provisions  relating  to  the  appointment  of  a  clerical  force  to  carry 
out  the  provisions  of  this  section  are  contained  in  Act  March  3,  1875, 
c.  130.  §  3,  set  forth  below. 

Other  provisions  relating  to  the  redemption  of  circulating  notes  at 
the  Treasury  are  contained  in  Act  July  14,  1890,  c.  708,  §  6.  set  forth 
below.  Said  provisions,  however,  are  not  applicable  to  deposits  made 
under  the  requirements  of  this  section. 

Circulating  notes  presented  to  the  Treasury  for  redemption  are  to 
be  redeemed  in  lawful  money,  by  Act  May  30,  1908,  c.  229,  §  12,  set 
forth  below. 

Sec.  4.   [Relates  to  withdrawal  of  circulating  notes.] 
This  section  authorizes  the  withdrawal  of  circulating  notes  in  \<'ho]e 
or  in  part,  and  is  set  forth  ante,  following  Rev.  St.  §  5167. 

Sec.  5.   [Relates  to  printing  of  circulating  notes.] 
This  section  requires  the  charter-number  of  each  association  to  be 

printed  on  each  of  its  notes,  and  is  set  forth  ante,  following  Rev.  St.  § 

5172. 

Sec.  6.   [Relates  to  United  States  notes.] 
This  section  limits  the  circulation  of  United  States  notes,  and  is  set 
forth  following  Rev.  St.  §  3582  (Comp.  St.  1901,  p.  2.397). 

Sees.  7-9.   [Superseded.    Act  Jan.  14,  1875,  c.  15,  §  3.] 

Section  7  of  this  act  repealed  part  of  Rev.  St.  §  5179,  and  provided 
for  the  withdrawal  of  a  certain  amount  of  the  circulating  notes  to 
'  secure  an  equitable  distribution  thereof  among  the  several  States. 

Section  8  provided  for  the  sale  of  bonds  deposited  to  secure  the  cir- 
culation in  case  of  a  refusal  or  neglect  to  comply  with  the  requisitions 
made  by  the  Comptroller  for  the  withdrawal  of  circulating  notes  as 
•provided  for  by  section  7. 

Section  9  provided  for  a  redistribution  of  the  currency  withdrawn. 

All  these  sections  are  superseded  by  Act  Jan.  14,  1875,  c.  15,  §  3, 
ante,  under  Rev.  St.  §  5177. 

ACT  MARCH  3,  1875,  c.  130,  §  3. 

Clerical  force  for  redemption  of  circulating  noteS. — That 
to  carry  into  effect  the  provisions  of  section  three  of  the 
act  entitled  "An  act  fixing  the  amount  of  United  States 


ACTS   OF   CONGRIOSS  535 

notes,  providing  for  a  redistribution  of  the  national-bank 
currency,  and  for  other  purposes"  approved  June  twenti- 
eth, eighteen  hundred  and  seventy-four,  the  Secretary  of 
the  Treasury  is  authorized  to  appoint  the  follovvnig  force, 
to  be  employed  under  his  direction,  namely :  In  the  Office 
of  the  Treasurer:     *     * 

In  the  Office  of  the  Comptroller  of  the  Currency :  *  * 
And  at  the  end  of  each  month,  the  Secretary  of  the 
Treasury  shall  re-imburse  the  Treasury  to  the  full  amount 
paid  out  under  the  provisions  of  this  section  by  transfer  of 
said  amount  from  the  deposit  of  the  national  banking-asso- 
ciations with  the  Treasury  of  the  United  States ;  and  at  the 
end  of  each  fiscal  year  he  shall  transfer  from  said  deposit 
to  the  Treasury  of  the  United  States  such  sum  as  may  have 
l:>een  actually  expended  under  his  direction  for  stationery, 
rent,  fuel,  light,  and  other  necessary  incidental  expenses 
which  have  been  incurred  in  carrying  into  efifect  the  pro- 
visions of  the  said  section  of  the  above-named  act. 

Act  March  3,  1S75,  c.  130,  §  3,  IS  Stat.  399. 

This  section  is   part   of  the  sundry   civil  appropriation  act   for   the 
fiscal  year   ending   June   30,   1876.  cited    above. 

Act  June  20,  1874,  c.  343,  §  3,  mentioned  in  this  section,  is  set  forth 
above. 

ACT  MARCH  3,   1887,  c.  378,  §   1. 

[Amended.     Act  March  3,   1903,  c.  1014.] 
This  section  is  amended  by  Act  March  3,  1903,  c.  1014,  set  forth  be- 
low. 

ACT  MARCH  3,  1903,  c.   1014. 

An  Act  to  Amend  Section  One  of  an  Act  Entitled  "An 
Act  to  Amend  Sections  Fifty-One  Hundred  and  Nine- 
ty-One  and    Fifty-One   Hundred   and    Ninety-Two  of 
the   Revised   Statutes  of  the   United    States,   and   for 
Other  Purposes."     (32  Stat.  1223.) 
Amendment  of  Act  March  3,  1887,  c.  378,  §  1.— Be  it  en- 
acted, &c..  That  section  one  of  an  Act  entitled  "An  Act 
to   amend   sections   fifty-one   hundred   and   ninety-one   and 
fifty-one  hundred  and  ninety-two  of  the  Revised  Statutes 
of  the  United   States,   and  for  other  purposes,"   approved 
March    third,    eighteen    hundred    and    eighty-seven,    be,    and 
the  same  is  hereby,  amended  to  read  as  follows : 

Additional  "reserve  cities"  of  25,000  inhabitants.  "That 
whenever  three-fourths  in  number  of  the  national  banks 
located  in  any  city  of  the  United  States  having  a  popula- 


APPENDIX 


tion  of  twentv-five  thousand  people  shall  make  application 
to  the  Comptroller  of  the  Currency,  in  writing,  asking  that 
the  name  of  the  city  in  which  such  banks  are  located  shall 
be  added  to  the  cities  named  in  sections  fifty-one  hundred 
and  ninety-one  and  fifty-one  hundred  and  ninety-two  of 
the  Revised  Statutes,  the  Comptroller  shall  have  authority 
to  grant  such  request,  and  every  bank  located  in  such  city 
shall  at  all  times  thereafter  have  on  hand,  in  lawful  money 
of  the  United  States,  an  amount  equal  to  at  least  twenty- 
five  per  centum  of  its  deposits,  as  provided  in  sections  fifty- 
one  hundred  and  ninety-one  and  fifty-one  hundred  and 
ninety-five  of  the  Revised  Statutes." 
Act  March  3.  1903.  c.  1014.  32   Stat.  1223. 

The  amendment  by  this  act  of  March  3,  1887,  c.  37S.  §  1,  as  set  forth 
in  Comp.  St.  1901,  p.  3490,  consists  in  reducing  the  limit  of  population 
of  cities  which  may  become  reserve  cities  from  50,000  to  25,000. 

ACT  MARCH  3,   1887,  c.  378,  §   2. 

Additional  "central  reserve  cities." — Sec.  2.  That  when- 
ever three-fourths  in  number  of  the  national  banks  located 
in  any  city  of  the  United  States  having  a  population  of  two 
hundred  thousand  people  shall  make  application  to  the 
Comptroller  of  the  Currency,  in  writing,  asking  that  such 
city  may  be  a  central  reserve  city,  like  the  city  of  New 
York,  in  which  one-half  of  the  lawful-money  reserve  of  the 
national  banks  located  in  other  reserve  cities  may  be  de- 
posited, as  provided  in  section  fifty-one  hundred  and  nine- 
ty-five of  the  Revised  Statutes,  the  Comptroller  shall  have 
authority,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, to  grant  such  request,  and  every  bank  located  in  such 
city  shall  at  all  times  thereafter  have  on  hand,  in  lawful 
money  of  the  United  States,  twenty-five  per  centum  of  its 
deposits,  as  provided  in  section  fifty-one  hundred  and  nine- 
ty-one of  the  Revised  Statutes. 

Act  March  3,  1887,  c.  378,  §  2,  24  Stat.  5G0. 
See  note  under  Rev.  St.  §  5191. 

Sec.  3.   [Amends  Act  Jan.  14,  1975,  c.  15,  §  3.] 

This  section  amends  Act  Jan.  14,  1875,  c.  15,  §  3,  following  Rev.  St. 
§  3575  (Comp.  St.  1901.  p.  2389),  which  relates  to  the  redemption  of 
legal-tender  notes. 

ACT  JULY  14,  1890,  c.  708,  §   6. 

Disposition  of  money  deposited  for  and  redemption  of 
circulating  notes. — That  upon  the  passage  of  this  act  the 
balances  standing  with  the  Treasurer  of  the  United  States 


ACTS   OF   CONGRESS  537 

to  the  respective  credits  of  national  banks  for  deposits 
made  to  redeem  the  circulating  notes  of  such  banks,  and  all 
deposits  thereafter  received  for  like  purpose,  shalUie  cover- 
ed into  the  Treasury  as  a  miscellaneous  receipt,  and  the 
Treasury  of  the  United  States  shall  redeem  from  the  gen- 
eral cash  in  the  Treasury  the  circulating  notes  of  said  banks 
which  may  come  into  his  possession  subject  to  redemption; 
and  upon  the  certificate  of  the  Comptroller  of  the  Currency 
that  such  notes  have  been  received  by  him  and  that  they 
have  been  destroyed  and  that  no  new  notes  will  be  issued 
in  their  place,  reimbursement  of  their  amount  shall  be  made 
to  the  Treasurer,  under  such  regulations  as  the  Secretary 
of  the  Treasury  may  prescribe  from  an  appropriation  here- 
by created,  to  be  known  as  'National  bank  notes:  Re- 
demption account,  but  the  provisions  of  this  act  shall  not 
api)ly  to  the  deposits  received  under  section  three  of  the 
act  of  June  twentieth,  eighteen  hundred  and  seventy-four, 
requiring  every  National  bank  to  keep  in  lawful  money 
with  the  Treasurer  of  the  United  States  a  sum  equal  to  five 
per  centum  of  its  circulation,  to  be  held  and  used  for  the 
redemption  of  its  circulating  notes;  and  the  balance  re- 
maining of  the  deposits  so  covered  shall,  at  the  close  of 
each  month,  be  reported  on  the  monthly  public  debt  state- 
ment as  debt  of  the  United  States  bearing  no  interest. 
Act  July  14.  ISOO,  c.  708,  §  6,  26  Stat.  2S9. 

This  section  is  part  of  an  act  directing  the  purchase  of  silver  bullion, 
and  the  issue  of  Treasury  notes  thereon,  etc.,  other  sections  of  which 
are  set  forth  or  referred  to  following  Rev.  St.  §  .3526  (Corop.  St.  1901. 
p.  2354). 

Act  June  20,  1874,  c.  34.3,  §  3,  mentioned  in  this  section,  is  set  forth 
above. 

ACT  JULY  28,  1892,  c.  317. 

An  Act  to  Amend  the  National  Bank  Act  in  Providing 
for  the  Redemption  of  National  Bank  Notes  Stolen 
from  or  Lost  by  Banks  of  Issue.     (27  Stat.  322.) 

Redemption  of  lost  or  stolen  circulating  notes. — Be  it  en- 
acted, &c.,  That  the  provisions  of  the  Revised  Statutes  of 
the  United  States,  providing  for  the  redemption  of  na- 
tional bank  notes,  shall  apply  to  all  national  bank  notes 
that  have  been  or  may  be  issued  to,  or  received  by,  any  na- 
tional bank,  notwithstanding  such  notes  may  have  been 
lost  by  or  stolen  from  the  bank  and  put  in  circulation  with- 


."38  APPENDIX 

out  the  signature  or  upon  the  forged  signature  of  the  pres- 
ident or  vice-president  and  cashier. 
Act  July  28,  1892,  c.  317,  27  Stat.  322. 

ACT  MAY  30,  1908,  c.  229,  §  12.     [H.  R.  21S71.] 

Redemption  by  Treasury  of  circulating  notes  in  lawful 
money. — Tliat  circulating  notes  of  national  banking  asso- 
ciations, when  presented  to  the  Treasury  for  redemption, 
as  provided  in  section  three  of  the  Act  approved  June  twen- 
lietli,  eighteen  hundred  and  seventy-four,  shall  be  redeemed 
in  lawful  money  of  the  United  States. 
Act  May  30.  1908,  c.  229,  §  12,  3.5  Stat.  552. 

This  spction  is  part  of  an  act  to  amend  the  national  banking  laws, 
other  sections  of  which  are  set  forth  or  referred  to  ante,  under  Rev. 
St.  §  5167. 

Act  June  20,  1874,  c.  343,  §  3,  mentioned  in  this  section,  is  set  forth 
above. 

Sec.  5193.     [Repealed.     Act  March  14,  1900,  c.  41,  §  6.] 

This  section  authorized  the  Secretary  of  the  Treasury  to  receive 
T'nited  States  notes  on  deppsit,  without  interest,  from  any  national 
bank,  in  sums  of  not  less  than  ten  thousand  dollars,  and  issue  certifi- 
cates therefor  in  denominations  of  not  less  than  five  thousand  dollars, 
payable  on  demand  in  United  States  notes  at  the  place  where  the  de- 
posits were  made,  and  provided  that  the  notes  so  deposited  should  not 
be  counted  as  part  of  the  lawful  money  reserve  of  the  association,  but 
that  the  certificates  issued  might  be  so  counted,  and  might  be  accepted 
in  the  settlement  of  clearing-house  balances  at  the  places  where  the 
deposits  therefor  were  made.  It  is  repealed  by  Act  M^rch  14.  1900,  c. 
41,  §  6,  ante,  following  Rev.  St.  §  2-54  (Comp.  St.  1901.  p.  141). 

Sec.  5194.     [Superseded.    Act  March  14,  1900,  c.  41,  §  6.] 

This  section,  as  originally  enacted,  was  as  follows: 
"The  power  conferred  on  the  Secretary  of  the  Treasury,  by  the_pre- 
ceding  section,  shall  not  be  exercised  so  as  to  create  any  expansion  or 
contraction  of  the  currency.  And  United  States  notes  for  which  cer- 
tificates are  issued  under  that  section,  or  other  United  States  notes  of 
like  amount,  shall  be  held  as  special  deposits  in  the  Treasury,  and  us- 
ed only  for  the  redemption  of  such  certificates." 

It  is  dependent  for  its  operative  effect  on  Rev.  St.  §  5193,  which  is 
repealed  by  Act  March  14,  1900,  c.  41,  §  6,  and  therefore*  becomes  in- 
operative.    See  note  under  Rev.  St.  §  5193. 

Sec.  5195.  Place  for  redemption  of  circulating  notes  to 
oe  designated. — Each  association  organized  in  any  of  the 
cities  named  in  section  fifty-one  hundred  and  ninety-one 
shall  select,  subject  to  the  approval  of  the  Comptroller  of 
"he  Currency,  an  association  in  the  city  of  New  York,  at 
vhich  it  will  redeem  its  circulating  notes  at  par;    and  may 


ACTS  OF   CONGRESS  539 

keep  one-half  of  its  lawful-money  reserve  in  cash  deposits 
in  the  city  of  New  York.  But  the  foreg;oing  provision  shall 
not  apply  to  associations  organized  and  located  in  the  city 
of  San  Francisco  for  the  purpose  of  issuing  notes  payable 
in  gold.  Each  association  not  organized  within  the  cities 
named,  shall  select,  subject  to  the  approval  of  the  Comp- 
troller, an  association  in  either  of  the  cities  named,  'at 
which  it  will  redeem  its  circulating  notes  at  par.  The 
Comptroller  shall  give  public  notice  of  the  names  of  the 
associations  selected,  at  which  redemptions  are  to  be  made 
by  the  respective  associations,  and  of  any  change  that  may 
be  made  of  the  association  at  which  the  notes  of  any  as- 
sociation are  redeemed.  Whenever  any  association  fails 
either  to  make  the  selection  or  to  redeem'  its  notes  as  afore- 
said, the  Comptroller  of  the  Currency  may,  upon  receiving 
satisfactory  evidence  thereof,  appoint  a  receiver,  in  the 
manner  provided  for  in  section  fifty-two  hundred  and  thir- 
ty-four, to  wind  up_  its  afifairs.  But  this  section  shall  not 
relieve  any  association  from  its  liability  to  redeem  its  cir- 
culating notes  at  its  own  counter,  at  par,  in  lawful  money 
on  demand. 

Act  June  3,  1864,  c.  106,  §  32,  13  Stat.  109. 

That  part  of  this  section  which  requires  or  permits  national  banks 
to  redeem  their  circulating  notes  elsewhere  than  at  their  own  coun- 
ters is  repealed  by  Act  June  20,  1874,  c.  343,  §  3,  ante,  following  Rev. 
St.  §  5192. 

Other  cities  may  be  made  "central  reserve  cities,"  bv  Act  March  3, 
1887,  c.  378,  §  2,  ante,  following  Rev.  St.  §  5192.  See  note  under  Rev. 
St.  §  5191. 

Sec.  5196.  National  banks  to  receive  notes  of  other  na- 
tional banks. — Every  national  banking  association  formed 
or  existing  under  this  Title,  shall  take  and  receive  at  par,  for 
any  debt  or  liability  to  it,  any  and  all  notes  or  bills  issued 
by  any  lawfully  organized  national  banking  association. 
But  this  provision  shall  not  apply  to  any  association  organ- 
ized for  the  purpose  of  issuing  notes  payable  in  gold. 

Act  June  3,  1864,  c.  106,  §  32,  13  Stat.  109.  Act  July  12,  1870,  c. 
282,  §  5,  16  Stat.  253. 

Sec.  5197.  Limitation  upon  rate  of  interest  which  may 
be  taken. — Any  association  may  take,  receive,  reserve,  and 
charge  on  any  loan  or  discount  made,  or  upon  any  note, 
bill  of  exchange,  or  other  evidences  of  debt,  interest  at  the 
rate  allowed  by  the  laws  of  the  State,  Territory,  or  district 


340  APPENDIX 

where  the  bank  is  located,  and  no  more,  except  that  where 
by  the  laws  of  any  State  a  different  rate  is  limited  for  banks 
of  issue  organized  under  State  laws,  the  rate  so  limited 
shall  be  allowed  for  associations  organized  or  existing  in 
any  such  State  under  this  Title.  When  no  rate  is  fixed  by 
the  laws  of  the  State,  or  Territory,  or  district,  the  bank  may 
take,  receive,  reserve,  or  charge  a  rate  not  exceeding  seven 
per  centum,  and  such  interest  may  be  taken  in  advance, 
reckoning  the  days  for  which  the  note,  bill,  or  other  evi- 
dence of  debt  has  to  run.  And  the  purchase,  discount,  or 
sale  of  a  bona  fide  bill  of  exchange,  payable  at  another  place 
thaii  the  place  of  such  purchase,  discount,  or  sale,  at  not 
more  than  the  current  rate  of  exchange  for  sight-drafts  in 
addition  to  the  interest,  shall  not  be  considered  as  taking 
or  receiving  a  greater  rate  of  interest. 
Act  June  3.  1SG4.  c.  106,  §  30.  13  Stat.  108. 

Sec.  5198.  [As  amended  1875.]  Consequences  of  taking 
usurious  interest;  [jurisdiction  of  suits  by  or  against  na- 
tional banks.] — The  taking,  receiving,  reserving,  or  charg- 
ing a  rate  of  interest  greater  than  is  allow^ed  by  the  pre- 
ceding section,  when  knowingly  done,  shall  be  deemed  a 
forfeiture  of  the  entire  interest  which  the  note,  bill,  or  other 
evidence  of  debt  carries  with  it,  or  which  has  been  agreed 
to  be  paid  thereon.  In  case  the  greater  rate  of  interest  has 
been  paid,  the  person  by  whom  it  has  been  paid,  or  his  le- 
gal representatives,  may  recover  back,  in  an  action  in  the 
nature  of  an  action  of  debt,  twice  the  amount  of  the  interest 
thus  paid  from  the  association  taking,  or  receiving  the 
same;  provided  such  action  is  commenced  within  two  years 
from  the  time  the  usurious  transaction  occurred.  That 
suits,  actions,  and  proceedings  against  any  association  un- 
der this  title  may  be  had  in  any  circuit,  district,  or  terri- 
torial court  of  the  United  States  held  within  the  district  in 
which  such  association  may  be  established,  or  in  any  State, 
county,  or  municipal  court  in  the  county  or  city  in  which 
said  association  is  located  having  jurisdiction  in  similar 
cases. 

Act  June  3,  1864,  c.  lOG,  §  30,  13  Stat.  108.     Act  Feb.  IS,  1875,  c. 

80,  18  Stat.  320. 
This  section  is  amended  by  Act  Feb.  18.  1875,  c.  80.  cited  abore.  by 

adding,  at  the  end  of  the  section  as  originally  enacted,  the  provisions 

-beginning  with  the  words,  "That  suits,  actions,  and  proceedings,"  etc., 

to  the  end  of  the  section  as  set  forth  here. 
Provisions  relating  to  jurisdiction  of  actions  by  and  against  national 


ACTS   OF   CONGRESS  541 

1)aiiks  are  contained  in  Act  July  12,  •1882,  c.  290,  §  4,  ante,  following 
Uov.  St.  S  TAHii. 

As  to  jurisdiction  of  district  courts  and  citizenship  of  national  banks 
for  purposes  of  actions.  Act  March  3,  1911,  c.  231,  §  24  (16],  ante,  p. 
40S. 

Sec.  5199.  Dividends. — The  directors  of  any  association 
may,  semi-annually,  declare  a  dividend  of  so  much  of  the 
net  profits  of  the  association  as  they  shall  judge  expedient; 
but  each  association  shall,  before  the  declaration  of  a  divi- 
dend, carry  one-tenth  part  of  its  net  profits  of  the  preceding 
half-year  to  its  surplus  fund  until  the  same  shall  amount  to 
tw^enty  per  centum  of  its  capital  stock. 
Act  June  3,  1864.  c.  106,  §  33,  13  Stat.  109. 

Sec.  5200.     [Amended.     Act  June  22,   1906,  c,  3516.] 
This  section  is  amended  by  Act  June  22.  1006,  c.  3516,  to  read  as 
set  forth  below. 

ACT  JUNE  22,  1906,  c.  3516.     [H.  R.  8973.] 

An  Act  to  Amend  Section  Fifty-Two  Hundred,  Revised 
Statutes  of  the  United  States,  Relating  to  National 
Banks.     (34  Stat.  451.) 

Amendment  of  Rev.  St.  §  5200.— Be  it  enacted,  &c.,  That 
section  fifty-two  hundred  of  the  Revised  Statutes  of  the 
United  States  be,  and  the  same  is  hereby,  amended  to  read 
as  follows : 

Limit  to  liabilities  which  may  be  incurred  by  any  one  per- 
son, etc.  "Sec.  5200.  The  total  liabilities  to  any  associa- 
tion, of  any  person,  or  of  any  company,  corporation,  or  firm 
for  money  borrowed,  including  in  the  liabilities  of  a  com- 
pany or  firm  the  liabilities  of  the  several  members  thereof, 
shall  at  no  time  exceed  one-tenth  part  of  the  amount  of  the 
capital  stock  of  such  associations,  actually  paid  in  and  un-  - 
impaired  and  one-tenth  part  of  its  unimpaired  surplus  fund: 
Provided,  however.  That  the  total  of  such  liabilities  shall 
in  no  event  exceed  thirty  per  centum  of  the  capital  stock 
of  the  association.  But  the  discount  of  bills  of  exchange 
drawn  in  good  faith  against  actually  existing  values,  and 
the  discount  of  commercial  or  business  paper  actually  own- 
ed by  the  person  negotiating  the  same  shall  not  be  con- 
sidered as  money  borrowed." 

Act  June  22.  1906.  c.  3516,  34  Stat.  451. 

Rev.  St.  §  5200,  amended  by  this  act,  is  set  forth  in  Comp.  St.  1901, 

p.  3494.     The  amendment  consists   principally  in  the  insertion,   after 

the  words  "actually  paid  in,"  contained  in  the  section  as  originally  en- 


542  APPENDIX 

acted,  of  the  words  "and  unimpaired  and  one-tenth  part  of  its  unim- 
paired surplus  fund:  Provided,  however,  That  the  total  of  such  lia- 
bilities shall  in  no  event  exceed  thirty  per  centum  of  the  capital  stock 
of  the  association,"  as  set  forth  here. 

Sec.  5201.  Associations  not  to  loan  or  purchase  their 
own  stock. — No  association  shall  make  any  loan  or  dis- 
count on  the  security  of  the  shares  of  its  own  capital  stock, 
nor  be  the  purchaser  or  holder  of  any  such  shares,  unless 
such  security  or  purchase  shall  be  necessary  to  prevent  loss 
upon  a  debt  previously  contracted  in  good  faith ;  and  stock 
so  purchased  or  acquired  shall,  within  six  months  frorn  the 
time  of  its  purchase,  be  sold  or  disposed  of  at  public  or 
private  sale;  or,  in  default  thereof,  a  receiver  may  be  ap- 
pointed to  close  up  the  business  of  the  association,  accord- 
ing to  section  fifty-two  hundred  and  thirty-four. 
Act  June  3,  1864,'c.  106,  §  35,  13  Stat.  110. 

Sec.  5202.     Limit  upon  indebtedness  to  be   incurred. — 

No  association  shall  at  any  time  be  indebted,  or  in  any  way 
liable,  to  an  amount  exceeding  the  amount  of  its  capital 
stock  at  such  time  actually  paid  in  and  remaining  undimin- 
ished by  losses  or  otherwise,  except  on  account  of  demands 
of  the  nature  following : 

First.  Notes  of  circulation. 

Second.  Moneys  deposited  with  or  collected  by  the  as- 
sociation. 

Third.  Bills  of  exchange  or  drafts  drawm  against  money 
actually  on  deposit  to  the  credit  of  the  association,  or  due 
thereto. 

Fourth.  Liabilities  to  the  stockholders  of  the  association 
for  dividends  and  reserved  profits. 

Act  June  3,  1864,  c.  106,  §  36,  13  Stat.  110. 

Sec.  5203.     Restriction  upon  use  of  circulating  notes. — 

No  association  shall,  either  directly  or  indirectly,  pledge  or 
hypothecate  any  of  its  notes  or  circulation,  for  the  purpose 
of  procuring  money  to  be  paid  in  on  its  capital  stock,  or  to 
be  used  in  its  banking  operations,  or  otherwise ;  nor  shall 
any  association  use  its  circulating  notes,  or  any  part  there- 
of, in'any  manner  or  form,  to  create  or  increase  its  capital 
stock. 

Act  June  3,  1804,  c.  106,  §  37,  13  Stat.  110. 

Sec.  5204.     Prohibition  upon  withdrawal  of  capital. — No 

association,  or  any  member  thereof,  shall,  during  the  time 


ACTS   OF   CONOIIESS  543 

it  shall  continue  its  banking  operations,  withdraw,  or  per- 
mit to  be  withdrawn,  either  in  the  form  of  dividends  or  oth- 
erwise, any  portion  of  its  capital.  If  losses  have  at  any  time 
been  sustained  by  any  such  association,  equal  tcrtJr  exceed- 
ing its  undivided  profits  then  on  hand,  no  dividend  shall  be 
made ;  and  no  dividend  shall  ever  be  made  by  any  associa- 
tion, while  it  continues  its  banking  operations,  to  an  arnount 
greater  than  its  net  profits  then  on  hand,  deducting  there- 
from its  losses  and  bad  debts.  All  debts  due  to  any  asso- 
ciations, on  which  interest  is  past  due  and  unpaid  for  a  pe- 
riod of  six  months,  unless  the  same  are  well  secured,  and 
in  process  of  collection,  shall  be  considered  bad  debts  with- 
in the  meaning  of  this  section.  But  nothing  in  this  section 
shall  prevent  the  reduction  of  the  capital  stock  of  the  as- 
sociation under  section  fifty-one  hundred  and  forty-three. 
Act  June  3,  1864,  c.  106,  §  38,  13  Stat.  110. 

Sec.  5205.  [.U  amended  1876.]  Enforcing  payment  of 
deficiency  in  capital  stock. — Every  association  which  shall 
have  failed  to  pay  up  its  capital  stock,  as  required  by  law, 
and  ever}'  association  whose  capital  stock  shall  have  be- 
come impaired  by  losses  or  otherwise,  shall  within  three 
months  after  receiving  notice  thereof  from  the  Comptroller 
of  the  Currency,  pay  the  deficiency  in  the  capital  stock,  by 
assessment  upon  the  shareholders  pro  rata  for  the  amount 
of  capital  stock  held  by  each  ;  and  the  Treasurer  of  the 
United  States  shall  withhold  the  interest  upon  all  bonds 
held  by  him  in  trust  for  any  such  association,  upon  notifica- 
tion from  the  Comptroller  of  the  Currency,  until  otherwise 
notified  by  him.  If  any  such  association  shall  fail  to  pay  up 
its  capital  stock,  and  shall  refuse  to  go  into  liquidation,  as 
provided  by  law,  for  three  months  after  receiving  notice 
from  the  Comptroller,  a  receiver  may  be  appointed' to  close 
up  the  business  of  the  association,  according  to  the  provi- 
sions of  section  fifty-two  hundred  and  thirty-four.  And 
provided,  That  if  any  shareholder  or  shareholders  of  such 
iDank  shall  neglect  or  refuse,  after  three  months'  notice,  to 
pay  the  assessment,  as  provided  in  this  section,  it  shall  be 
the  duty  of  the  board  of  directors  to  cause  a  sufficient 
amount  of  the  capital  stock  of  such  shareholder  or  share- 
holders to  be  sold  at  public  auction  (after  thirty  days'  no- 
tice shall  be  given  by  posting  such  notice  of  sale  in  the  of- 
fice of  the  bank,  and  by  publishing  such  notice  in  a  news- 


.■j44  appendix 

paper  of  the  city  or  town  in  which  the  bank  is  located,  or 
in  a  newspaper  published  nearest  thereto,)  to  make  good 
the  deficiency,  and  the  balance,  if  any,  shall  be  returned  to 
such  delinquent  shareholder  or  shareholders. 

Act  March  3,  1873,  c.  269,  §  1,  17  Stat.  603.  Act  June  30,  1876,  c. 
ir)6.  §  4,  19  Stat.  64. 

This  section  is  amended  by  Act  June  30,  1876;  c.  156,  §  4,  cited 
above,  by  adding,  at  the  end  of  the  section  as  originally  enacted,  the 
proviso,  as  set  forth  here. 

Sec.  5206.    Restriction  upon  use  of  notes  of  other  banks. 

—No  association  shall  at  any  time  pay  out  on  loans  or  dis- 
counts, or  in  purchasing-  drafts  or  bills  of  exchange,  or  in 
payment  of  deposits,  or  in  any  other  mode  pay  or  put  in 
circulation,  the  notes  of  any  bank  or  banking  association 
which  are  not,  at  any  such  time,  receivable,  at  par,  on  de- 
posit, and  in  payment  of  debts  by  the  association  so  paying 
out  or  circulating  such  notes;  nor  shall  any  association 
knowingly  pay  out  or  put  in  circulation  any  notes  issued  by 
any  bank  or  banking  association  which  at  the  time  of  such 
paying  out  or  putting  in  circulation  is  not  redeeming  its 
circulating  notes  in  lawful  money  of  the  United  States. 
Act  June  3,  1864,  c.  106,  §  39,  13  Stat.  111. 

Sec.  5207.  United  States  notes  not  to  be  held  as  collat- 
eral, etc.;  penalty. — No  association  shall  hereafter  offer  or 
receive  United  States  notes  or  national-bank  notes  as  se- 
curity or  as  collateral  security  for  any  loan  of  money,  or  for 
a  consideration  agree  to  withhold  the  same  from  use,  or  of- 
fer or  receive  the  custody  or  promise  of  custody  of  such 
notes  as  security,  or  as  collateral  security,  or  consideration 
for  any  loan  of  money.  Any  association  offending  against 
the  provisions  of  this  section  shall  be  deemed  guilty  of  a 
misdemeanor,  and  shall  be  fined  not  more  than  one  thous- 
and dollars  and  a  further  sum  equal  to  one-third  of  the 
money  so  loaned.  The  officer  or  officers  of  any  association 
who  shall  make  any  such  loan  shall  be  liable  for  a  further 
sum  equal  to  one-quarter  of  the  money  loaned ;  and  any 
fine  or  penalty  incurred  by  a  violatign  of  this  section  shall 
be  recoverable  for  the  benefit  of  the  party  bringing  such 
suit. 

Act  Feb.  19,  1869,  c.  32,  15  Stat.  270. 

Sec.  5208.  Penalty  for  falsely  certifying  checks. — It  shall 
be  unlawful  for  any  officer,  clerk,  or  agent  of  any  national 


ACTS  OF   CONGUESS  543 

banking  association  to  certify  any  check  drawn  upon  the  as- 
sociation unless  the  person  or  company  drawing  the  check 
has  on  deposit  with  the  association,  at  the  time.^auch  check 
is  certified,  an  amount  of  money  equal  to  the  amount  spec- 
ified in  such  check.  Any  check  so  certified  by  duly  author- 
ized officers  shall  be  a  good  and  valid  obligation  against  the 
association;  but  the  act  of  any  officer,  clerk,  or  agent  of 
any  association,  in  violation  of  this  section,  shall  subject 
such  bank  to  the  liabilities  and  proceedings  on  the  part  of 
the  Comptroller  as  provided  for  in  section  fifty-two  hundred 
and  thirty-four. 

Act  March  3,  1S69,  c.  135,  15  Stat.  335. 

Provisions  prescribing  the  punishment  for  falsely  certifying  checks 
are  contained  in  Act  July  12,  1882,  c.  290,  §  13,  set  forth  below. 

ACT  JULY  12,  1882,  c.  290,  §   13. 

Punishment  for  falsely  certifying  checks,  etc. — That  any 
officer,  clerk,  or  agent  of  any  national-banking  association 
who  shall  willfully  violate  the  provisions  of  an  act  entitled 
"An  act  in  reference  to  certifying  checks  by  national 
banks,"  approved  March  third,  eighteen  hundred  and  sixty- 
nine,  being  section  fifty-two  hundred  and  eight  of  the  Re- 
vised Statutes  of  the  United  States,  or  who  shall  resort  to 
any  device,  or  receive  any  fictitious  obligation,  direct  or 
collateral,  in  order  to  evade  the  provisions  thereof,  or  who 
shall  certify  checks  before  the  amount  thereof  shall  have 
been  regularly  entered  to  the  credit  of  the  dealer  upon  the 
books  of  the  banking  association,  shall  be  deemed  guilty  of 
a  misdemeanor,  and  shall,  on  conviction  thereof  in  any  cir- 
cuit or  district  court  of  the  United  States,  be  fined  not  more 
than  five  thousand  dollars,  or  shall  be  imprisoned  not  more 
than  five  years,  or  both,  m  the  discretion  of  the  court. 
Act  July  12,  1882,  c.  290,  §  13,  22  Stat.  166. 

This  section  is  part  of  an  act  to  enable  national  banking  associations 
to  extend  their  corporate  existence,  etc.,  other  sections  of  which  are 
set  forth  or  referred  to  ante,  following  Rev.  St.  §  5136. 

Sec.    5209.     Embezzlement;    penalty. — Every   president, 

director,  cashier,  teller,  clerk,  or  agent  of  any  association, 
who  emxbezzles,  abstracts  or  willfully  misapplies  any  of  the 
moneys,  funds,  or  credits  of  the  association  ;  or  who,  with- 
out authority  from  the  directors,  issues  or  puts  in  circula- 
tion any  of  the  notes  of  the  association ;  or  who,  without 
such  authority,  issues  or  puts  forth  any  certificate  of  deposit, 
TIFF.BKS.&  B.— 35 


546  APPENDIX 

draws  any  order  or  bill  of  exchange,  makes  any  acceptance, 
assigns  any  note,  bond,  draft,  bill  of  exchange,  mortgage, 
judgment,  or  decree;  or  who  makes  any  false  entry  in  any 
book,  report,  or  statement  of  the  association,  with  intent,  in 
either  case,  to  injure  or  defraud  the  association  or  any  oth- 
er company,  body  politic  or  corporate,  or  any  individual 
person,  or  to  deceive  any  officer  of  the  association,  or  any 
agent  appointed  to  examine  the  affairs  of  any  such  associa- 
tion; and  every  person  who  with  like  intent  aids  or  abets 
any  officer,  clerk,  or  agent  in  any  violation  of  this  section, 
shall  be  deemed  guilty  of  a  misdemeanor,  and  shall  be  im-. 
prisoned  not  less  than  five  years  nor  more  than  ten. 

Act  June  3,  1864,  c.  106,  §  55,  13  Stat.  116.     Act  April  6,  1869,  c.  11, 
16  Stat.  7.    Act  July  8,  1870,  c.  226,  16  Stat.  195. 

Sec.  5210.     List  of  shareholders,  etc.,  to  be  kept, — The 

President  and  cashier  of  every  national  banking  association 
shall  cause  to  be  kept  at  all  times  a  full  and  correct  list  of 
the  names  and  residences  of  all  the  shareholders  in  the  asso- 
ciation, and  the  number  of  shares  held  by  each,  in  the  office 
where  its  business  is  transacted.  Such  list  shall  be  subject 
to  the  inspection  of  all  the  shareholders  and  creditors  of  the 
association,  and  the  officers  authorized  to  assess  taxes  under 
State  authority,  during  business-hours  of  each  day  in  which 
business  may  be  legally  transacted.  A  copy  of  such  list,  on 
the  first  Monday  of  July  of  each  year,  verified  by  the  oath 
of  such  president  or  cashier,  shall  be  transmitted  to  the 
Comptroller  of  the  Currency. 

Act  June  3,  1864,  c.  106,  §  40,  13  Stat.  111. 

Sec.  5211.  [As  amended  1877.]  Reports  to  Comptroller 
of  the  Currency. — Every  association  shall  make  to  the 
Comptroller  of  the  Currency  not  less  than  five  reports  dur- 
ing each  year,  according  to  the  form  which  may  be  pre- 
scribed by  him,  verified  by  the  oath  or  affirmation  of  the 
president  or  cashier  of  such  association,  and  attested  bythe 
signature  of  at  least  three  of  the  directors.  Each  such  re- 
port shall  exhibit,  in  detail  and  under  appropriate  heads,  the 
resources  and  liabilities  of  the  association  at  the  close  of 
business  on  any  past  day  by  him  specified ;  and  shall  be 
transmitted  to  the  Comptroller  within  five  days  after  the 
receipt  of  a  request  or  requisition  therefor  from  him,  and  in 
the  same  form  in  which  it  is  made  to  the  Comptroller  shall 
be  published  in  a  newspaper  published  in  the  place  where 


ACTS   OP   CONGRESS  547 

such  association  is  established,  or  if  there  is  no  newspaper 
in  the  place,  then  in  the  one  puljlished  nearest  thereto  in 
the  same  county,  at  the  expense  of  the  association ;  and 
such  proof  of  publication  shall  be  furnished  asT^y  be  re- 
quired by  the  Comptroller.  The  Comptroller  shall  also 
have  power  to  call  for  special  reports  from  any  particular 
association  whenever  in  his  judgment  the  same  are  neces- 
sary in  order  to  a  full  and  complete  knowledge  of  its  con- 
dition. 

Act  June  3.  1864,  c.  100,  §  34,  13  Stat.  109.  Act  March  3,  1869,  c. 
130,  §  1,  15  Stat.  326.    Act  Feb.  27,  1877,  c.  69,  19  Stat.  252. 

This  section  is  amended  by  Act  Feb.  27,  1877,  c.  69.  cited  above,  by 
striking  out,  after  the  words  "resources  and  liabilities  of  the,"  the 
word  "associations,"  and  substituting  therefor  the  word  "association," 
as  set  forth  here. 

The  verification  required  by  this  section  may  be  made  before  a  nota- 
ry public  or  other  state  officer,  having  an  official  seal,  and  authorized 
to  administer  oaths,  by  Act  Feb.  26,  ISSl,  c.  82,  set  forth  below. 

All  savings  banks  and  savings  and  trust  companies  organized  under 
acts  of  Congress  are  subject  to  the  provisions  of  this  and  the  two  fol- 
lowing sections,  by  Act  June  30,  1876,  c.  156,  §  6,  post,  following  Rev. 
St.  §  5213. 

ACT  FEB.  26,    1881,   c.  82. 

An  Act  Defining-  the  Verification  of  Returns  of  National 
Banks.     (21  Stat.  352.) 

Verification  of  reports. — Be  it  enacted,  &c.,  That  the  oath 
or  affirmation  required  by  section  fifty-two  hundred  and 
eleven  of  the  Revised  Statutes,  verifying-  the  returns  made 
by  national  banks  to  the  Comptroller  of  the  Currency,  when 
taken  before  a  notary  public  properly  authorized  and  com- 
missioned by  the  State  in  which  such  notary  resides  and  the 
bank  is  located,  or  any  other  officer  having-  an  official  seal, 
authorized  in  such  State  to  administer  oaths,  shall  be  a  suf- 
ficient verification  as  contemplated  by  said  section  fifty-two 
hundred  and  eleven  :  Provided,  That  the  officer  administer- 
ing the  oath  is  not  an  officer  of  the  bank. 
Act  Feb.  26,  ISSl,  c.  82,  21  Stat.  352. 

Sec.  5212.  Report  as  to  dividends. — In  addition  to  the 
reports  required  by  the  preceding  section,  each  association 
shall  report  to  the  Comptroller  of  the  Currency,  within  ten 
days  after  declaring  any  dividend,  the  amount  of  such  divi- 
dend, and  the  amount  of  net  earnings  in  excess  of  such  div- 


54S  APPENDIX 

idend.     Such  reports  shall  be  attested  by  the  oath  of  the 
president  or  cashier  of  the  association. 

Act  March  3.  1869,  c.  130,  §_2,  15  Stat.  327. 

See  note  under  Rev.  St.  §  5211. 

Sec.  5213.  Penalty  for  failure  to  make  reports. — Every 
association  which  fails  to  make  and  transmit  any  report  re- 
quired under  either  of  the  two  preceding  sections  shall  be 
subject  to  a  penalty  of  one  hundred  dollars  for  each  day  aft- 
er the  periods,  respectively,  therein  mentioned,  that  it  de- 
lays to  make  and  transmit  its  report.  Whenever  any  asso- 
ciation delays  or  refuses  to  pay  the  penalty  herein  imposed, 
after  it  has-been  assessed  by  the  Comptroller  of  the  Cur- 
rency, the  amount  thereof  may  be  retained  by  the  Treasurer 
of  the  United  States,  upon  the  order  of  the  Comptroller  of 
the  Currency,  out  of  the  interest,  as  it  may  become  due  to 
the  association,  on  the  bonds  deposited  with  him  to  secure 
circulation.  All  sums  of  money  collected  for  penalties  un- 
der this  section  shall  be  paid  into  the  Treasury  of  the  Unit- 
ed States. 

Act  March  3,  1869,  c.  130,  §§  1,  2,  15  Stat.  326. 

See  note  under  Rev.  St.  §  5211. 

ACT  JUNE  30,  1876,  c.  156,  §  6. 

Reports  of  savings  banks  and  savings  and  trust  com- 
panies.— That  all  savingsibanks  or  savings  and  trust  com- 
panies organized  under  authority  of  any  act  of  Congress 
shall  be,  and  are  hereby,  required  to  make,  to  the  Cornp- 
troller  of  the  Currency,  and  publish,  all  the  reports  which 
national  banking-associations  are  required  to  make  and 
publish  under  the  provisions  of  sections  fifty-two  hundred 
and  eleven,  fifty-two  hundred  and  twelve  and  fifty-two  hun- 
dred and  thirteen,  of  the  Revised  Statutes,  and  shall  be  sub- 
ject to  the  same  penalties  for  failure  to  make  or  publish 
such  reports  as  are  therein  provided ;  which  penalty  may  be 
collected  by  suit  before  any  court  of  the  United  States  in  the 
district  in  which  said  savings  banks  or  savings  and  trust 
companies  may  be  located  and  all  savings  or  other  banks 
now  organized,  or  which  shall  hereafter  be  organized,  in  the 
District  of  Columbia,  under  any  act  of  Congress,  which 
shall  have  capital  stock  paid  up  in  whole  or  in  part,  shall  be 
subject  to  all  the  provisions  of  the  Revised  Statutes,  and  of 
all  acts  of  Congres^  applicable  to  national  banking  associa- 
tions, so  far  as  the  same  may  be  applicable  to  such  savings 


ACTS  OF  CONGRESS  540 

or  other  banks :  Provided,  That  such  savings  banks  now 
established  shall  not  be  required  to  have  a  paid-in  capital 
exceedin^^  one  hundred  thousand  dollars.  ^,^^ 

Act  June  30,  1S7G,  c.  15G,  §  6,  19  Stat.  64. 

This  section  is  part  of  an  act  autliorizing  the  appointment  of  receiv- 
ers of  national  banl<s,  etc.,  other  sections  of  which  are  set  forth  or 
referred  to  post,  following  Rev.  St.  §  5238. 

Sec.  5214.     [Amended.     Act  ]\Iay  30,  1908.  c.  229,  §  9.] 
This   section,  set  forth  in  Comp.  St.  1901,  p.  3500,  is  amended   by 
Act  May  30,  1908.  c.  229,  §  9,  set  forth  below. 

ACT  MAY  30,  1908,  c.  229,  §  9.      [H.  R.  21871.1 

Amendment  of  Rev.  St.  §  5214.— Sec.  9.  That  section  fif- 
ty-two hundred  and  fourteen  of  the  Revised  Statutes,  as 
amended,  be  further  amended  to  read  as  follows: 

Taxes  on  circulating  notes ;  increase  of  rate  on  notes  se- 
cured otherwise  than  by  bonds  of  United  States ;  monthly 
returns  of  amount  of  notes  so  secured ;  disposition  of  taxes 
thereon  received. — "Sec.  5214.  National  banking  associa- 
tions having  on  deposit  bonds  of  the  United  States,  bearing 
interest  at  the  rate  of  two  per  centum  per  annum,  including 
the  bonds  issued  for  the  construction  of  the  Panama  Canal, 
under  the  provisions  of  section  eight  of  'An  Act  to  provide 
for  the  construction  of  a  canal  connecting  the  waters  of  the 
Atlantic  and  Pacific  oceans,'  approved  June  twenty-eighth, 
nineteen  hundred  and  two,  to  secure  its  circulating  notes, 
shall  pay  to  the  Treasurer  of  the  United  States,  in  the 
months  of  January  and  July,  a  tax  of  one-fourth  of  one  per 
centum  each  half  year  upon  the  average  amount  of  such  of 
its  notes  in  circulation  as  are  based  upon  the  deposit  of  such 
bonds ;  and  such  associations  having  on  deposit  bonds  of 
the  United  States  bearing  interest  at  a  rate  higher  than  two 
per  centum  per  annum  shall  pay  a  tax  of  one-half  of  one 
per  centum  each  half  year  upon  the  average  amount  of  such 
of  its  notes  in  circulation  as  ate  based  upon  the  deposit  of 
such  bonds.  National  banking  associations  having  circulat- 
ing notes  secured  otherwise  than  by  bonds  of  the  United 
States  shall  pay  for  the  first  month  a  tax  at  the  fate  of  five 
per  centum  per  annum  upon  the  average  amount  of 
such  of  their  notes  in  circulation  as  are  based  upon 
the  deposit  of  such  securities,  and  afterwards  an  addi- 
tional tax  of  one  per  centum  per  annum  for  each  month 
until  a  tax  of  ten  per  centum  per  annum  is  reached,  and 


550  APPENDIX 

thereafter  such  tax  of  ten  per  centum  per  annum,  upon 
the  average  amount  of  such  notes.  Every  national  bank- 
ing association  having  outstanding  circulating  notes 
secured  by  a  deposit  of  other  securities  than  .United  States 
bonds  shall  make  monthly  returns,  under  oath  of  its 
president  or  cashier,  to  the  Treasurer  of  the  United  States, 
in  such  form  as  the  Treasurer  may  prescribe,  of  the  average 
monthlv  amount  of  its  notes  so  secured  in  circulation  ;  and 
it  shall' be  the  duty  of  the  Comptroller  of  the  Currency  to 
cause  such  reports  of  botes  in  circulation  to  be  verified  by 
examination  of  the  banks'  records.  The  taxes  received  on 
circulating  notes  secured  otherwise  than  by  bonds  of  the 
United  States  shall  be  paid  into  the  Division  of  Redemption 
of  the  Treasury  and  credited  and  added  to  the  reserve  fund 
held  for  the  redemption  of  United  States  and  other  notes." 
Act  May  30.  1908,  c.  229,  §  9,  35  Stat.  550. 

This  section  is  part  of  an  act  to  amend  the  national  banking  laws, 
the  other  sections  of  which  are  set  forth  or  referred  to  under  Rev.  St. 
§  5167. 

Rev.  St.  §  5214,  amended  by  this  section,  is  set  forth  in  Comp.  St. 
1901,  p.  3500. 

Provisions  similar  to  those  of  this  section  as  amended,  relating  to 
the  tax  on  notes  based  upon  deposit  of  2  per  cent,  bonds,  are  contain- 
ed in  Act  March  14,  1900.  c.  41,  §  13,  following  this  section. 

Previous  provisions  similar  to  those  of  this  section  as  amended,  re- 
lating to  the  tax  on  notes  based  upon  deposit  of  Panama  Canal  bonds, 
were  contained  in  Act  Dec.  21,  1905,  c.  3,  §  1,  34  Stat.  5  (Comp.  St. 
Supp.  1911,  p.  1053). 

Every  national  banking  association  is  required  to  pay  a  tax  of  ten 
per  centum  on  the  amount  of  notes  of  any  person,  firm,  association 
other  than  a  national  banking  association,  or  of  any  corporation.  State 
bank,  or  State  banking  association,  or  of  any  town,  city,  or  municipal 
corporation,  used  for  circulation  and  paid  out  by  them,  by  Act  Feb.  8, 
1875,  c.  36,  §  20,  ante,  under  Rev.  St.  §§  3412.  3413. 

Provisions  relating  to  the  taxation  of  banks  other  than  national 
banks  are  contained  in  Rev.  St.  §§  3407-3417,  and  acts  set  forth  there- 
under. 

ACT  MARCH  14,  1900,  c.  41,  §   13. 

Tax  on  circulating  notes. — That  every  national  banking 
association  having  on  deposit,  as  provided  by  law,  bonds  of 
the  United  States  bearing  interest  at  the  rate  of  two  per 
centum  per  annum,  issued  under  the  provisions  of  this  Act, 
to  secure  its  circulating  notes,  shall  pay  to  the  Treasurer  of 
the  United  States,  in  the  months  of  January  and  July,  a  tax 
of  one-fourth  of  one  per  centum  each  half  year  upon  the  av- 
erage amount  of  such  of  its  notes  in  circulation  as  are  based 


ACTS  OF   CONGRESS  551 

upon  the  deposit  of  said  two  per  centum  bonds ;  and  such 
taxes  shall  be  in  lieu  of  existing  taxes  on  its  notes  in  circu- 
lation imposed  by  section  fifty-two  hundred  and'fJTlirteen  of 
the  Revised  Statutes. 

Act  March  14.  1000.  c.  41,  §  1.3.  31  Stat.  49. 

This  section  is  part  of  an  act  to  define  and  fix  the  standard  of  value, 
to  maintain  the  parity  of  all  forms  of  money,  etc.,  other  sections  are 
set  forth  or  referred  to  under  Rev.  St.  §  3526  (Comp.  St.  1901,  p. 
23.J6). 

Sec.  5215.  Half-yearly  return  of  circulation,  deposits, 
and  capital  stock. — In  order  to  enable  the  Treasurer  to  as- 
sess the  duties  imposed  by  the  preceding  section,  each  asso- 
ciation shall,  within  ten  days  from  the  first  days  of  January 
and  July  of  each  year,  make  a  return,  under  the  oath  of  its 
president  or  cashier,  to  the  Treasurer  of  the  United  States, 
in  such  form  as  the  Treasurer  may  prescribe,  of  the  average 
amount  of  its  notes  in  circulation,  and  of  the  average 
amount  of  its  deposits,  and  of  the  average  amount  of  its 
capital  stock,  beyond  the  amount  invested  in  United  States 
bonds,  for  the  six  months  next  preceding  the  most  recent 
first  day  of  January  or  July.  Every  association  which  fails 
so  to  make  such  return  shall  be  liable  to  a  penalty  of  two 
hundred  dollars,  to  be  collected  either  out  of  the  interest  as 
it  may  become  due  such  association  on  the  bonds  deposited 
with  the  Treasurer,  or,  at  his  option,  in  the  manner  in  which 
penalties  are  to  be  collected  of  other  corporations  under  the 
laws  of  the  United  States. 

Act  June  3,  1864,  c.  106,  §  41,  13  Stat.  111. 

Sec.  5216.  Penalty  for  failure  to  make  return. — WHien- 
ever  any  association  fails  to  make  the  half-yearly  return  re- 
quired by  the  preceding  section,  the  duties  to  be  paid  by 
such  association  shall  be  assessed  upon  the  amount  of  notes 
delivered  to  such  association,  by  the  Comptroller  of  the 
Currency,  and  upon  the  highest  amount  of  its  deposits  and 
capital  stock,  to  be  ascertained  in  such  manner  as  the 
Treasurer  may  deem  best. 

Act  June  3,  1864,  c.  106,  §  41,  13  Stat.  111. 

.Sec.  5217.  Penalty  for  failure  to  pay  duties. — Whenever 
an  association  fails  to  pay  the  duties  imposed  by  the  three 
preceding  sections,  the  sums  due  may  be  collected  in  the 
manner  provided  for  the  collection  of  United  States  taxes 
from  other  corporations;   or  the  Treasurer  may  reserve  the 


552 


APPENDIX 


amount  out  of  the  interest,  as  it  may  become  due,  on  the 
bonds  deposited  with  him  by  such  defaulting  association. 
Act  June  3,  1864,  c.  106,'  §  41,  13  Stat.  111. 

Sec.  5218.  Refunding  excessive  duties. — In  all  cases 
where  an  association  has  paid  or  may  pay  in  excess  of  what 
may  be  or  has  been  found  due  from  it,  on  account  of  the 
duty  required  to  be  paid  to  the  Treasurer  of  the  United 
States,  the  association  may  state  an  account  therefor, 
which,  on  being  certified  by  the  Treasurer  of  the  United 
States,  and  found  correct  by  the  First  Comptroller  of  the 
Treasury,  shall  be  refunded  in  the  ordinary  manner  by 
warrant  on  the  Treasury. 

Res.  March  2,  1867,  No.  49,  14  Stat.  572. 

Sec.  5219.  State  taxation. — Nothing  herein  shall  pre- 
vent all  the  shares  in  any  association  from  being  included 
in  the  valuation  of  tile  personal  property  of  the  owner  or 
holder  of  such  shares,  in  assessing  taxes  imposed  by  au- 
thority of  the  State  within  which  the  association  is  located ; 
but  the  legislature  of  each  State  may  determine  and  direct 
the  manner  and  place  of  taxing  all  the  shares  of  national 
banking  associations  located  within  the  State,  subject  only 
to  the  two  restrictions,  that  the  taxation  shall  not  be  at  a 
greater  rate  than  is  assessed  upon  other  moneyed  capital  in 
the  hands  of  individual  citizens  of  such  State,  and  that  the 
shares  of  any  national  banking  association  owned  by  non- 
residents of  any  State  shall  be  taxed  in  the  city  or  town 
where  the  bank  is  located,  and  not  elsewhere.  Nothing 
herein  shall  be  construed  to  exempt  the  real  property  of  as- 
sociations from  either  State,  county,  or  municipal  taxes,  to 
the  same  extent,  according  to  its  value,  as  other  real  prop- 
erty is  taxed. 

Act  .Tune  3,  1864,  c.  106,  §  41,  13  Stat,  111.     Act  Feb.  10,  1868,  c. 
7,  15  Stat.  34. 

CHAPTER  FOUR— DISSOLUTION  AND 
RECEIVERSHIP 


Sec. 

5220.  Voluntary  dissolution  of  associa- 
tions. 

6221.  Notice  of  intent  to  dissolve. 

5222.  Deposit  of  lawful  money  to  re- 
deem outstanding  circulation. 


Sec. 

5223.  Exemption    as    to    an    association 

consolidating  with  another.' 

5224.  Reassignment    of    bonds    and    re- 

demption  of    notes,    etc. 

5225.  Destruction  of  redeemed  notes. 


ACTS   OF   CONGRESS 


553 


Sec. 

5226.  Mode  of   protesting   notes. 

5227.  Examination  by  special  agent. 

5228.  Continuing  business  after  default. 

5229.  Notice  to   holders;    redemption   at 

Treasury;  cancellation  of  bonds. 

5230.  Sale  of  bonds  at  auction. 

5231.  Sale  of  bonds  at  private  sale. 

5232.  Disposal   of   protested   notes. 

5233.  Cancellation      of      national      bank 

notes. 

5234.  Appointment   of   receivers. 

5235.  Notice   to  present  claims. 

5236.  Dividends. 

5237.  Injunction  upon   receivership. 

5238.  Fees  and  expenses. 
Act   June   30,  1876,    c.   156. 

1.  Receivers  for  banks  violating  law, 

failing  to  pay  judgments,  or  be- 
coming insolvent. 

2.  Enforcement    of  shareholders'    in- 

dividual  liability  by  creditors. 


Sec. 


Act 
1 


2 

3 

5239 

5240, 

5241, 
5242 
5243 


;.  Shareholders'  meeting;  continu- 
ance of  receivership  or  appoint- 
ment of  agent  ;  winding  up  busi- 
ness;    distribution    of   assets. 

[Amends  Rev.  St.''t^205.] 

[Relates  to  counterfeit  notes.] 

[Relates  to  reports  of  savings 
banks  or  savings  and  trust  com- 
panies.] 

March  20,  1S86,  c.  28. 

Purchase  by  receiver  of  property 
of  bank;  request  to  Comptrol 
ler. 

Approval  of  request. 

Payment. 

Penalty  for  violation  of  this  Ti- 
tle. 

Appointment  of  occasional  exam- 
iners;    [compensation.] 

Limit   of   visitorial   powers. 

Transfers,  when  void. 

Use  of  the  title  "national." 


Sec.  5220,     Voluntary  dissolution  of  associations. — Any 

association  may  go  into  liquidation  and  be  closed  by  the 
vote  of  its  shareholders  owning  two-thirds  of  its  stock. 
Act  June  3,  1864,  c.  106,  §  42,  13  Stat.  112. 

The  shareholders'  individual  liability,  as  prescribed  by  Rev.  St.  § 
5151.  may  be  enforced  by  any  creditor  of  any  bank  which  has  gone 
into  liquidation  under  the  provisions  of  this  section,  by  Act  June  30, 
1876,  c.  156,  §  2,  post,  following  Rev.  St.  §  5238. 

Sec.  5221.  Notice  of  intent  to  dissolve. — Whenever  a 
vote  is  taken  to  go  into  liquidation  it  shall  be  the  duty  of 
the  board  of  directors  to  cause  notice  of  this  fact  to  be  cer- 
tified, under  the  seal  of  the  association,  by  its  president  or 
cashier,  to  the  Comptroller  of  the  Currency,  and  publica- 
tion thereof  to  be  made  for  a  period  of  two  months  in  a 
newspaper  published  in  the  city  of  New  York,  and  also  in 
a  newspaper  published  in  the  city  or  town  in  which  the  as- 
sociation is  located,  or  if  no  newspaper  is  there  published, 
then  in  the  newspaper  published  nearest  thereto,  that  the 
association  is  closing  up  its  affairs,  and  notifying  the  hold- 
ers of  its  notes' and  other  creditors  to  present  the  notes  and 
other  claims  against  the  association  for  payment. 
Act  Jun6  3,  1864,  c.  106,  §  42,  13  Stat.  112. 

Sec.  5222.  Deposit  of  lawful  money  to  redeem  outstand- 
ing circulation. — Within  six  months  from  the  date  of  the 
vote  to  go  into  liquidation,  the  association  shall  deposit  with 


554  APPENDIX 

the  Treasurer  of  the  United  States,  lawful  money  of  the 
United  States  sufficient  to  redeem  all  its  outstanding  circu- 
lation. The  Treasurer  shall  execute  duplicate  receipts  for 
money  thus  deposited,  and  deliver  one  to  the  association 
and  the  other  to  the  Comptroller  of  the  Currency,  stating 
the  amount  received  by  him,  and  the  purpose  for  which  it 
has  been  received;  and  the  money  shall  be  paid  into  the 
Treasury  of  the  United  States,  and  placed  to  the  credit  of 
such  association  upon  redemption  account. 

Act  June  3,  1864,  c.  106,  §§  42,  43,  13  Stat.  112.     Act  July  14,  1870. 
0.  2.57,  16  Stat.  274. 

Sec.  5223.  Exemption  as  to  an  association  consolidating 
with  another. — An  association  which  is  in  good  faith  wind- 
ing up  its  business  for  the  purpose  of  consolidating  with  an- 
other association  shall  not  be  required  to  deposit  lawful 
money  for  its  outstanding  circulation;  but  its  assets  and 
liabilities  shall  be  reported  by  the  association  with  which 
it  is  in  process  of  consolidation. 
Act  July  14,  1870,  c.  257,  16  Stat.  274. 

Sec.  5224.  [As  amended  1875.]  Reassignment  of  bonds 
and  redemption  of  notes,  etc. — Whenever  a  sufficient  de- 
posit of  lawful  money  to  redeem  the  outstanding  circulation 
of  an  association  proposing  to  close  its  business  has  been 
made,  the  bonds  deposited  by  the  association  to  secure  pay- 
ment of  its  notes  shall  be  re-assigned  to  it,  in  the  manner 
prescribed  by  section  fifty-one  hundred  and  sixty-two.  And 
thereafter  the  association  and  its  shareholders  shall  stand 
discharged  from  all  liabilities  upon  the  circulating  notes, 
and  those  notes  shall  be  redeemed  at  the  Treasury  of  the 
United  States.  And  if  any  such  bank  shall  fail  to  make  the 
deposit  and  take  up  its  bonds  for  thirty  days  after  the  ex- 
piration of  the  time  specified,  the  Comptroller  of  the  Cur- 
rency shall  have  power  to  sell  the  bonds  pledged  for  the 
circulation  of  said  bank,  at  public  auction  in  New  York 
City,  and,  after  providing  for  the  redempti(^n  and  cancella- 
tion of  said  circulation  and  the  necessary  expenses  of  the 
sale,  to  pay  over  any  balance  remaining  to  the  bank  or  its 
legal  representative. 

Act  June  3,  1SC4.  c.  106,  §  42,  13  Stat.  112.     Act  Feb.  18,  1875,  c. 

80.  18  Stat.  320.  ^ 

This  section  is  amended  by  Act  Feb.  18,  1875,  c.  80,  cited  above,  by 

inserting  at  the  end  of  the  section  as  originally  enacted,  the  provisions 


ACTS  OF   CONGRESS  555 

beginning  with  the  words,  "And  if  any  such  bank  shall  fail,"  etc.,  to 
the  end  of  the  section  as  set  forth  here. 

Provisions  relating  to  redeeming  circulating  notes  in  the  ordinary 
course  of  business  are  set  forth  in  chapter  3  of  this  Title. 

Sec.  5225.  [As  amended  1877.]  Destruction  of  redeemed, 
notes. — Whenever  the  Treasurer  has  redeemed  any  of  the 
notes  of  an  association  which  has  commenced  to  close  its 
affairs  under  the  five  preceding-  sections,  he  shall  cause  the 
ncJtes  to  be  mutilated  and  charged  to  the  redemption  ac- 
count of  the  association ;  and  all  notes  so  redeemed  by  the 
Treasurer  shall,  every  three  months,  be  certified  to  and 
^burned  in  the  manner  prescribed  in  section  fifty-one  hun- 
dred and  eighty-four. 

Act  June  3.  1864,  c.  106,  §  43,  13  Stat.  112.  Act  Feb.  27,  1S77,  c. 
69.  19  Stat.  252. 

This  section  is  amended  by  Act  Feb.  27,  1877.  c.  69,  cited  above, 
by  striking  out,  after  the  words  "its  affairs  under  the,"  the  word  "six," 
and  substituting  therefor  the  word  "five,"  as  set  forth  here. 

Provisions  relating  to  the  maceration  of  national  bank  notes,  and 
repealing  so  much  of  Rev.  St.  §  5184,  and  this  section  as  provides  for 
the  burning  of  the  same,  are  contained  in  Act  June  23,  1874,  c.  455, 
§  1,  ante,  p.  476. 

Sec.  5226.  Mode  of  protesting  notes. — Whenever  any  na- 
tional banking  association  fails  to  redeem  in  the  lawful 
money  of  the  United  States  any  of  its  circulating  notes,  up- 
on demand  of  payment  duly  made  during  the  usual  hours 
of  business,  at  the  office  of  such  association,  or  at  its  desig- 
nated place  of  redemption,  the  holder  may  cause  the  same 
to  be  protested,  in  one  package,  by  a  notary  public,  unless 
the  president  or  cashier  of  the  association  whose  notes  are 
presented  for  payment,  or  the  president  or  cashier  of  the 
association  at  the  place  at  which  .they  are  redeemable  offers 
to  waive  demand  and  notice  of  the  protest,  and,  in  pursu- 
ance of  such  oft'er,  makes,  signs,  and  delivers  to  the  party 
making  such  demand  an  admission  in  writing,  stating  the 
time  of  the  demand,  the  amount  demanded,  and  the  fact  of 
the  non-payment  thereof.  The  notary  public,  on  making 
such  protest,  or  upon  receiving  such  admission,  shall  forth- 
with forward  such  admission  or  notice  of  protest  to  the 
Comptroller  of  the  Currency,  retaining  a  copy  thereof.  If, 
however,  satisfactory  proof  is  produced  to  the  notary  public 
that  the  payment  of  the  notes  demanded  is  restrained  by 
order  of  any  court  of  competent  jurisdiction,  he  shall  not 
protest  the  same.     When  the  holder  of  any  notes  causes 


556  APPENDIX 

more  than  one  note  or  package  to  be  protested  on  the  same 
day,  he  shall  not  receive  pay  for  more  than  one  protest. 
Act  June  3,  1864,  c.  106,  §  46,  13  Stat.  113. 

Sec.  5227.  Examination  by  special  agent. — On  receiving 
notice  that  any  national  banking  association  has  failed  to 
redeem  any  of  its  circulating  notes,  as  specified  in  the  pre- 
ceding section,  the  Comptroller  of  the  Currency,  w^ith  the 
concurrence  of  the  Secretary  of  the  Treasury,  may  ap- 
point a  special  agent,  of  whose  appointment  immediate  no- 
tice shall  be  given  to  such  association,  who  shall  immedi- 
ately proceed  to  ascertain  whether  it  has  refused  to  pay  its 
circulating  notes  in  the  lawful  money  of  the  United  States, 
when  demanded,  and  shall  report  to  the  Comptroller  the 
fact  so  ascertained.  If,  from  such  protest,  and  the  report 
so  made,  the  Comptroller  is  satisfied  that  such  association 
has  refused  to  pay  its  circulating  notes  and  is  in  default, 
he  shall,  within  thirty  days  after  he  has  received  notice  of 
such  failure,  declare  the  bonds  deposited  by  such  associa- 
tion forfeited  to  the  United  States,  and  they  shall  there- 
upon be  so  forfeited. 

Act  June  3,  1864,  c.  106,  §  47,  13  Stat.  114. 

Sec.  5228.  [As  amended  1875.]  Continuing  business 
after  default. — After  a  default  on  the  part  of  an  association 
to  pay  any  of  its  circulating  notes  has  been  ascertained  by 
the  Comptroller,  and  notice  thereof  has  been  given  by  him 
to  the  association,  it  shall  not  be  lawful  for  the  associa- 
tion suffering  the  same  to  pay  out  any  of  its  notes,  dis- 
count any  notes  or  bills,  or  otherwise  prosecute  the  busi- 
ness of  banking,  except  to  receive  and  safely  keep  money 
belonging  to  it,  and  to  deliver  special  deposits. 

Act  June  3,  1864,  c.  106,  §  46,  13  Stat.  113.     Act  Feb.  18,  1875.  c. 

80.  18  Stat.  320. 
This  section  is  amended  by  Act  Feb.  18,  1875,  c.  SO,  cited  above,  by 

striking  out,  after  the  words  "and  notice,"  the  words  "of  forfeiture  of 

the  bonds,"  and  substituting  therefor  the  word  "thereof^"  as  set  forth 

here. 

Sec.  5229.  Notice  to  holders;  redemption  at  Treasury; 
cancellation  of  bonds. — Immediately  upon  declaring  the 
bonds  of  an  association  forfeited  for  non-payment  of  its 
notes,  the  Comptroller  shall  give  notice,  in  such  manner  as 
the  Secretary  of  the  Treasury  shall,  by  general  rules  or  oth- 
erwise, direct,  to  the  holders  of  the  circulating  notes  of  such 


ACTS  OF   CONGUESS  557 

association,  to  present  them  for  payment  at  the  Treasury  of 
the  United  States;  and  the  same  shall  be  paid  as  presented 
in  lawful  money  of  the  United  States ;  whejidiipon  the 
Comptroller  may,  in  his  discretion,  cancel  an  amount  of 
bonds  pledged  by  such  association  equal  at  current  market 
rates,  riot  exceeding  par,  to  the  notes  paid. 
Act  June  3,  1804,  c.  106,  §  47,  13  Stat.  114. 

Sec.  5230.  Sale  of  bonds  at  auction. — Whenever  the 
Comptroller  has  become  satisfied,  by  the  protest  or  the 
waiver  and  admission  specified  in  section  fifty-two  hun- 
dred and  twenty-six,  or  by  the  report  provided  for  in  sec- 
tion fifty-two  hundred  and  twenty-seven,  that  any  asso- 
ciation has  refused  to  pay  its  circulating  notes,  he  may, 
instead  of  canceling  its  bonds  cause  so  much  of  them  as 
may  be  necessary  to  redeem  its  outstanding  notes  to  be 
sold  at  public  auction  in  the  city  of  New  York,  after  giv- 
ing thirty  days'  notice  of  such  sale  to  the  association.  For 
any  deficiency  in  the  proceeds  of  all  the  bonds  of  an  asso- 
ciation, when  thus  sold,  to  reimburse  to  the  United  States 
the  amount  expended  in  paying  the  circulating  notes  of 
the  association,  the  United  States  shall  have  a  paramount 
lien  upon  all  its  assets;  and  such  deficiency  shall  be  made 
good  out  of  such  assets  in  preference  to  any  and  all  other 
claims  whatsoever,  except  the  necessary  costs  and  expenses 
of  administering  the  same. 

Act  June  3,  18G4,  c.  106,  §§  47,  48,  13  Stat.  114. 

Sec.  5231.  Sale  of  bonds  at  private  sale. — The  Comp- 
troller may,  if  he  deems  it  for  the  interest  of  the  United 
States,  sell  at  private  sale  any  of  the  bonds  of  an  associa- 
tion' shown  to  have  made  default  in  paying  its  notes,  and 
receive  therefor  either  money  or  the  circulating  notes  of 
the  association.  But  no  such  bonds  shall  be  sold  by  pri- 
vate sale  for  less  than  par,  nor  for  less  than  the  market- 
value  thereof  at  the  time  of  sale ;  and  no  sales  of  any  such 
bonds,  either  public  or  private,  shall  be  complete  until  the 
transfer  of  the  bonds  shall  have  been  made  with  the  for- 
malities prescribed  by  sections  fifty-one  hundred  and  sixty- 
two,  fifty-one  hundred  and  sixty-three,  and  fifty-c^ne  hun- 
dred and  sixty-four. 

Act  June  3,  1S64.  c.  106,  §  49,  13  Stat.  114. 

Sec.  5232.  Disposal  of  protested  notes. — The  Secretary 
of  the  Treasur}-  may,  from  time  to  time,  make  such  regu- 


558  ArPEXDix 

lations  respecting  the  disposition  to  be  made  of  circulating 
notes  after  presentation  at  the  Treasury  of  the  United 
States  for  payment,  and  respecting  the  perpetuation  of 
the  evidence  of  the  payment  thereof,  as  may  seem  to  him 
proper. 

Act  June  3,  1S64,  c.  106,  §  47,  13  Stat.  114. 

Sec.  5233.     Cancellation    of    national    bank    notes. — All 

notes  of  national  banking  associations  presented  at  the 
Treasury  of  the  United  States  for  payment  shall,  on  being 
paid,  be  canceled. 

Act   June  3,  1SG4,  c.  106,  §  47,  13  Stat.  114. 

Sec.  5234.  Appointment  of  receivers. — On  becoming 
satisfied,  as  specified  in  sections  fifty-two  hundred  and 
twenty-six  and  fift3'-two  hundred  and  twenty-seven,  that 
any  association  has  refused  to  pay  its  circulating  notes  as 
therein  mentioned,  and  is  in  default,  the  Comptroller  of 
the  Currency  may  forthwith  appoint  a  receiver,  and  re- 
quire of  him  such  bond  and  security  as  he  deems  proper. 
Such  receiver,  under  the  direction  of  the  Comptroller,  shall 
take  possession  of  the  books,  records,  and  assets  of  every 
description  of  such  association,  collect  all  debts,  dues,  and 
claims  belonging  to  it,  and  upon  the  order  of  a  court  of 
record  of  competent  jurisdiction,  may  sell  or  compound  all 
bad  or  doubtful  debts,  and,  on  a  like  order,  may  sell  all 
the  real  and  personal  property  of  such  association,  on  such 
terms  as  the  court  shall  direct ;  and  may,  if  necessary  to 
pay  the  debts  of  such  association,  enforce  the  individual 
liability  of  the  stockholders.  Such  receiver,  shall  pay  over 
all  money  so  made  to  the  Treasurer  of  the  United  States, 
subject  to  the  order  of  the  Comptroller,  and  also  make 
report  to  the  Comptroller  of  all  his  acts  and  proceedings. 

Act  June  3,  1864,  c.  106,  §  50,  13  Stat.  114. 

Other  provisions  relating  to  the  appointment,  powers,  and  duties  of 
receivers  and  agents  are  contained  in  Act  June  30.  1876.  c.  156.  as 
amended  by  Act  Aug.  3.  1S92.  c.  360.  and  Act  March  2,  1897.  c.  354, 
and  Act  March  29,  1886,  c.  28,  post,  following  Rev.  St.  §  5238. 

Sec.  5235.  Notice  to  present  claims. — The  Comptroller 
shall,  upon  appointing  a  receiver,  cause  notice  to  be  given, 
by  advertisement  in  such  newspapers  as  he  may  direct,  for 
three  consecutive  months,  calling  on  all  persons  who  may 


ACTS  OP  CONGRKSS  559 

have  claims  agi^ainst  such  association  to  present  the  same, 
and  to  make  legal  proof  thereof. 

Act  June  3,  1864,  c.  lOG,  §  50,  13  Stat,  114. 

See  note   under   Kev.   St.   §  oL'.'U.  ""^^ 

Sec.  5236.  Dividends, — From  time  to  time,  after  full 
provision  has  been  first  made  for  refunding-  to  the  United 
States  any  deficiency  in  redeeming-  the  notes  of  such  as- 
sociation, the  Comptroller  shall  rnake  a  ratable  dividend 
of  the  money  so  paid  over  to  him  by  such  receiver  on  all 
such  claims  as  may  have  been  proved  to  his  satisfaction 
or  adjudicated,  in  a  court  of  competent  jurisdiction,  and, 
as  the  proceeds  of  the  assets  of  such  association  are  paid 
over_  to  him,  shall  make  further  dividends  on  all  claims 
previously  proved  or  adjudicated;  and  the  remainder  of 
the  proceeds,  if  any,  shall  be  paid  over  to  the  shareholders 
of  such  association,  or  their  legal  representatives,  in  pro- 
portion to  the  stock  by  them  respectively  held. 
Act  June  3,  1S64,  c.  106,  §  50,  13  Stat,  114. 

Sec.  5237.  Injunction  upon  receivership. — Whenever  an 
association  against  which  proceedings  have  been  instituted, 
on  account  of  any  alleged  refusal  to  redeem  its  circulating 
notes  as  aforesaid,  denies  having  failed  to  do  so,  it  may, 
at  any  time  within  ten  days  after  it  has  been  notified  of  the 
appointment  of  an  agent,  as  provided  in  section  fifty-two 
hundred  and  twenty-seven,  apply  to  the  nearest  circuit,  or 
district,  or  territorial  court  of  the  United  States  to  enjoin 
further  proceedings  in  the  premises ;  and  such  court,  after 
citing  the  Comptroller  of  the  Currency  to  show  cause  why 
further  proceedings  should  not  be  enjoined,  and  after  the 
decision  of  the  court  or  finding  of  a  jury  that  such  asso- 
ciation has  not  refused  to  redeem  its  circulating  notes, 
when  legally  presented,  in  the  lawful  money  of  the  United 
States,  shall  make  an  order  enjoining  the  Comptroller,  and 
any  receiver  acting  under  his  direction,  from  all  further 
proceedings  on  account  of  such  alleged  refusal. 

Act  June  3,  1S64.  c,  106,  §  50,  13  Stat,  114, 

See  note  under  Rev,  St,  §  5234. 

Sec.  5238,  Fees  and  expenses, — All  fees  for  protesting 
the  notes  issued  by  any  national  banking  association  shall 
be  paid  by  the  person  procuring  the  protest  to  be  made,  and 
such  association  shall  be  liable  therefor;  but  no  part  of 
the  bonds  deposited  by  such  association   shall  be  applied 


3G0  AITEXDIX 

to  the  payment  of  such  fees.  All  expenses  of  any  prelim- 
inary or  other  examinations  into  the  condition  of  any  as- 
sociation shall  be  paid  by  such  association.  All  expenses 
of  any  receivership  shall  be  paid  out  of  the  assets  of  such 
association  before  distribution  of  the  proceeds  thereof. 

Act  June  3,  1864,  c.  106,  §  51,  13  Stat.  115. 

See  note  under  Rev.  St.  §  5234,  and  also  acts  set  forth  below. 

ACT  JUNE  30,    1876,  c.   156.      [As  amended  1892,  1897.] 

An  Act  Authorizing  the  Appointment  of  Receivers  of 
National  Banks,  and  for  Other  Purposes.  (19  Stat. 
63.) 
Receivers  for  banks  violating  la>v,  failing  to  pay  judg- 
ments, or  becoming  insolvent. — Be  it  enacted,  &c..  That 
whenever  any  national  banking  association  shall  be  dis- 
solved, and  its  rights,  privileges,  and  franchises  declared 
forfeited,  as  prescribed  in  section  fifty-two  hundred  and 
thirty-nine  of  the  Revised  Statutes  of  the  United  States, 
or  whenever  any  creditor  of  any  national  banking  asso-. 
ciation  shall  have  obtained  a  judgment  against  it  in  any 
court  of  record,  and  made  application,  accompanied  by  a 
certificate  from  the  clerk  of  the  court  stating  that  such 
judgfnent  has  been  rendered  and  has  remained  unpaid  for 
the  space  of  thirty  days,  or  whenever  the  Comptroller  shall 
become  satisfied  of  the  insolvency  of  a  national  banking 
association,  he  may,  after  due  examination  of  its  affairs, 
in  either  case,  appoint  a  receiver  who  shall  proceed  to  close 
up  such  association,  and  enforce  the  personal  liability  of 
the  shareholders,  as  provided  in  section  fifty-two  hundred 
and  thirty-four  of  said  statutes. 

Act  June  30,  1876,  c.  156,  §  1,  19  Stat.  63. 

A  national  bank  may  not  be  adjudged  an  involuntary  bankrupt.     Act 
Feb.  5,  1903,  c.  487,   §  3,  32   Stat.  797    (Comp.   St.   Supp.  1911,   p. 
•    1494). 

Enforcement  of  shareholders'  individual  liability  by  cred- 
itors.— Sec.  2.  That  when  any  national  banking  associa- 
tion shall  have  gone  into  liquidation  under  the  provisions 
of  section  five  thousand  two  hundred  and  twenty  of  said 
sUtutes,  the  individual  liability  of  the  shareholders  pro- 
vided for  by  section  fifty-one  hundred  and  fifty-one  of  said 
statutes  may  be  enforced  by  any  creditor  of  such  associa- 
tion, by  bill  in  equity,  in  the  nature  of  a  creditor's  bill, 
brought  by  such  creditor  on  behalf  of  himself  and  of  all 


ACTS  OF   CONGRESS  561 

otlier  creditors  of  the  association,  against  the  shareholders 
thereof,  in  any  court  of  the  United  States  having  original 
jurisdiction  in  equity  for  the  district  in  which  such  asso- 
ciation may  have  been  located  or  established.-—- 
Act  June  30,  1870,  c.  150,  §  2,  19  Stat.  03. 

Shareholders'  meeting ;  continuance  of  receivership  or 
appointment  of  agent;  winding  up  business;  distribution 
of  assets. — Sec.  3.  That  whenever  any  association  shall 
have  been  or  shall  be  placed  in  the  hands  of  a  receiver, 
as  provided  in  section  fifty-two  hundred  and  thirty-four 
and  other  sections  of  the  Revised  Statutes  of  the  United 
States,  and  when,  as  provided  in  section  fifty-two  hundred 
and  thirty-six  thereof,  the  Comptroller  of  the  Currency 
shall  have  paid  to  each  and  every  creditor  of  such  associa- 
tion, not  including  shareholders  who  are  creditors  of  such 
association,  whose  claim  or  claims  as  such  creditor  shall 
have  been  proved  or  allowed  as  therein  prescribed,  the 
full  amount  of  such  claims,  and  all  expenses  of  the  receiv- 
ership and  the  redemption  of  the  circulating  notes  of  sucji 
association  shall  have  been  provided  for  by  depositing  law- 
ful money  of  the  United  States  with  the  Treasurer  of  the 
United  States,  the  Comptroller  of  the  Currency  shall  call  a 
meeting  of  the  shareholders  of  such  association  by  giving 
notice  thereof  for  thirty  days  in  a  newspaper  published  in 
the  town,  city,  or  county  where  the  business  of  such  asso- 
ciation was  carried  on,  or  if  no  newspaper  is  there  pub- 
lished, in  the  newspaper  published  nearest  thereto.  At 
such  meeting  the  shareholders  shall  determine  whether  the 
receiver  shall  be  continued  and  shall  wind  up  the  affairs  of 
such  association,  or  whether  an  agent  shall  be  elected  for 
that  purpose,  and  in'  so  determining  the  said  shareholders 
shall  vote  b}^  ballot,  in  person  or  by  proxy,  each  share  of 
stock  entitling  the  holder  to  one  vote,  and  the  majority  of 
the  stock  in  value  and  number  of  shares  shall  be  necessary 
to  determine  whether  the  said  receiver  shall  be  continued, 
or  whether  an  agent  shall  be  elected.  In  case  such  ma- 
jority shall  determine  that  the  said  receiver  shall  be  con- 
tinued, the  said  receiver  shall  thereupon  proceed  with  the 
execution  of  his  trust,  and  shall  sell,  dispose  of,  or  other- 
wise collect  the  assets  of  the  said  association,  and  shall 
possess  all  the  powers  and  authority,  and  be  subject  to  all 
the  duties  and  liabilities  originally  conferred  or  imposed 
upon  him  by  his  appointment  as  such  receiver,  so  far  as  the 
1;iff.Bks.&  B.— .30 


562  APPENDIX 

same  remain  applicable.  In  case  the  said  meeting  shall, 
by  the  vote  of  a  majority  of  the  stock  in  value  and  number 
of  shares,  determine  that  an  agent  shall  be  elected,  the  said 
meeting  shall  thereupon  proceed  to  elect  an  agent,  voting 
bv  ballot,  in  person  or  by  proxy,  each  share  of  stock  enti- 
tling the  holder  to  one  vote,  and  the  person  who  shall 
receive  votes  representing  at  least  a  majority  of  stock  in 
value  and  number  shall  be  declared  the  agent  for  the  pur- 
poses hereinafter  provided ;  and  whenever  any  of  the  share- 
holders of  the  association  shall,  after  the  election  of  such 
agent,  have  executed  and  filed  a  bond  to  the  satisfaction 
of  the  Comptroller  of  the  Currency,  conditioned  for  the 
payment  and  discharge  in  full  of  each  and  every  claim  that 
may  thereafter  be  proved  and  allowed  by  and  before  a 
competent  court,  and  for  the  faithful  performance  of  all 
and  singular  the  duties  of  such  trust,  the  Comptroller  and 
the  receiver  shall  thereupon  transfer  and  deliver  to  such 
agent  all  the  undivided  or  uncollected  or  other  assets  of 
such  association  then  remaining  in  the  hands  or  subject  to 
the  order  and  control  of  said  Comptroller  and  said  receiver, 
or  either  of  them;  and  for  this  purpose  said  Comptroller 
and  said  receiver  are  hereby  severally  empowered  and  di- 
rected to  execute  any  deed,  assignment,  transfer,  or  other 
instrument  in  writing  that  may  be  necessary  and  proper; 
and  upon  the  execution  and  delivery  of  such  instrument 
to  the  said  agent  the  said  Comptroller  and  the  said  re- 
ceiver shall  by  virtue  of  this  Act  be  discharged  from  any 
and  all  liabilities  to  such  association  and  to  each  and  all 
the  creditors  and  shareholders  thereof.  Upon  receiving 
such  deed,  assignment,  transfer,  or  other  instrument  the 
person  elected  such  agent  shall  hold,  control,  and  dis- 
pose of  the  assets  and  property  of  such  association  which 
he  may  receive  under  the  terms  hereof  for  the  benefit  of 
the  shareholders  of  such  association,  and  he  may  in  his 
own  name,  or  in  the  name  of  such  association,  sue  and  be 
.  sued  and  do  all  other  lawful  acts  and  things  necessary  to 
finally  settle  and  distribute  the  assets  and  property  in  his 
hands,  and  may  sell,  compromise,  or  compound  the  debts 
due  to  such  association,  with  the  consent  and  approval  of 
the  circuit  or  district  court  of  the  United  States  for  the 
district  where"  the  business  of  such  association  was  car- 
ried on.  and  shall  at  the  conclusion  of  his  trust  render  to 
such  district  or  circuit  court  a  full  account  of  all  his  pro- 


ACTS  OF  CONGRESS 


5G3 


ceedings,  receipts,  and  expenditures  as  such  agent,  which 
court  shall,  upon  due  notice,  settle  and  adjust  such  ac- 
counts and  discharge  said  agent  and  the  suretie^jipon  said 
bond. 

And  in  case  any  such  agent  so  elected  shall  refuse  to 
serve,  or  die,  resign,  or  be  removed,  any  shareholder  may 
call  a  meeting  of  the  shareholders  of  such  association  in 
the  town,  city,  or  village  where  the  business  of  the  said  as- 
sociation was  carried  on,  by  giving  notice  thereof  for  thirty 
days  in  a  newspaper  published  in  said  town,  city,  or  vil- 
lage, or  if  no  newspaper  is  there  published,  in  the  newspa- 
per published'nearcst  thereto,  at  which  meeting  the  share- 
holders shall  elect  an  agent,  voting  by  ballot,  in  person 
or  by  proxy,  each  share  of  stock  entitling  the  holder  to  one 
vote,  and  when  such  agent  shall  have  received  votes  rep- 
resenting at  least  a  majority  of  the  stock  in  value  and  num- 
ber of  shares,  and  shall  have  executed  a  bond  to  the  share- 
holders conditioned  for  the  faithful  performance  of  his  du- 
ties, in  the  penalty  fixed  by  the  shareholders  at  said  meet- 
ing, with  two  sureties,  to  be  approved  by  a  judge  of  a 
court  of  record,  and  file  said  bond  in  the  office  of  the  clerk 
of  a  court  of  record  in  the  county  where  the  business  of 
said  association  was  carried  on,  he  shall  have  all  the  rights, 
powers,  and  duties  of  the  agent  first  elected  as  hereinbefore 
provided.  At  any  meeting  held  as  hereinbefore  provided 
administrators  or  executors  of  deceased  shareholders  may 
act  and  sign  as  the  decedent  might  have  done  if  living, 
and  guardians  of  minors  and  trustees  of  other  persons  may 
so  act  and  sign  for  their  ward  or  wards  or  cestui  que  trust. 
The  proceeds  of  the  assets  or  property  of  any  such  associa- 
tion which  may  be  undistributed  at  the  time  of  such  meet- 
ing or  may  be  subsequently  received  shall  be  distributed 
as  follows: 

First.  To  pay  the  expenses  of  the  execution  of  the  trust 
to  the  date  of  such  payment. 

Second.  To  repay  any  amount  or  amounts  which  have 
been  paid  in  by  any  shareholder  or  shareholders  of  such 
association  upon  and  b}^  reason  of  any  and  all  assessments 
made  upon  the  stock  of  such  association  by  the  order  of 
the  Comptroller  of  the  Currency  in  accordance  with  the 
provisions  of  the  statutes  of  the  United  States ;    and 

Third.  The  balance  ratably  among  such  stockholders,  in 
proportion  to   the  number  of  shares   held   and   owned   by 


564  APPENDIX 

each.  Such  distribution  shall  be  made  from  time  to  time 
as  the  proceeds  shall  be  received  and  as  shall  be  deemed 
advisable  by  the  said  Comptroller  or  said  agent. 

Act  June  30,  1876,  c.  156,  §  3,  19  Stat.  63.  Act  Aug.  3,  1892.  c. 
360,  27  Stat.  345.  Act  March  2,  1897,  c.  354,  29  Stat.  600. 
This  section,  as  originally  enacted,  was  as  follows: 
'•That  whenever  any  association  shall  have  been  or  shall  be  placed 
in  the  hands  of  a  receiver,  as  provided  in  section  fifty-two  hundred 
and  thirty-four  and  other  sections  of  said  statutes,  and  when,  as  pro- 
vided in  section  fifty-two  hundred  and  thirty-six  thereof,  the  Comp- 
troller shall  have  paid  to  each  and  every  creditor  of  such  association, 
not  including  shareholders  who  are  creditors  of  such  association, 
whose  claim  or  claims  as  such  creditor  shall  have  been  proved  or 
allowed  as  therein  prescribed,  the  full  amount  of  such  claims  and 
all  expenses  of  the  receivership,  and  the  redemption  of  the  circulat- 
ing notes  of  such  association  shall  have  been  provided  for  by  deposit- 
ing lawful  money  of  the  United  States  with  the  Treasurer  of  the 
United  States,  the  Comptroller  of  the  Currency  shall  call  a  meeting 
of  the  shareholders  of  such  association  by  giving  notice  thereof  for 
thirty  days  in  a  newspaper  published  in  the  town,  city,  or  county 
where  the  business  of  such  association  was  carried  on,  or  if  no 
newspaper  is  there  published,  in  the  newspaper  published-  nearest 
thereto,  at  which  meeting  the  shareholders  shall  elect  an  agent,  vot- 
ing by  ballot,  in  person  or  by  proxy,  each  share  of  stock  entitling 
the  holder  to  one  vote;  and  when  such  agent  shall  have  received 
votes  representing  at  least  a  majority  of  the  stock  in  value  and  num- 
ber of  shares,  and  when  any  of  the  shareholders  of  the  association 
shall  have  executed  and  filed  a  bond  to  the  satisfaction  of  the  Comp- 
troller of  .the  Currency,  conditioned  for  the  payment  and  discharge 
in  full  of  any  and  every  claim  that  may  hereafter  be  proved  and  al- 
lowed against  such  association  by  and  before  a  competent  court,  and 
for  the  faithful  performance  and  discharge  of  all  and  singular  the 
duties  of  such  trust,  the  Comptroller  and  the  receiver  shall  thereupon 
transfer  and  deliver  to  such  agent  all  the  undivided  oi*  uncollected  or 
other  assets  and  property  of  such  association  then  remaining  in  the 
hands  or  subject  to  the  order  or  control  of  said  Comptroller  and  said 
receiver,  or  either  of  them;  and  for  this  purpose,  said  Comptroller  and 
said  receiver  are  hereby  severally  empowered  to  execute  any  deed,  as- 
signment, transfer,  or  other  instrument  in  writing  that  may  be  neces- 
sary and  proper;  whereupon  the  said  Comptroller  and  the  said  re- 
ceiver shall,  by  virtue  of  this  act,  be  discharged  and  released  from 
any  and  all  liabilities  to  such  associations,  and  to  each  and  all  of 
the  creditors  and  shareholders  thereof;  and  such  agent  is  hereby 
authorized  to  sell,  compromise,  or  compound  the  debts  due  to  such 
association  upon  the  order  of  a  competent  court  of  record  or  of  the 
United  States  circuit  court  for  the  district  where  the  business  of  the 
association  was  carried  on.  Such  agent  shall  hold,  control,  and  dis- 
pose of  the  assets  and  property  of  any  association  which  he  may 
receive  as  hereinbefore  provided  for  the  benefit  of  the  shareholders 
of  such  association  as  they,  or  a  majority  of  them  in  value  or  num- 
ber of  shares  may  direct,  distributing  such  assets  and  property 
,  among  such  shareholders  in  proportion  to  the  shares  held  by  each; 
and  he   may,   in   his  own  name  or  in   the  name   of  such   association, 


ACTS  OF   CONGRLSS  505 

sue  and  be  sued,  and  do  a;!  other  lawful  acts  and  things  necessary 
to  finally  settle  and  distribute  the  assets  and  propoi-ty  in  his  hands. 
In  selecting  an  agent  as  hereinbefore  provided,  administrators  or  ex- 
ecutors of  deceased  shai'eholdcrs  may  act  and  sign  as^'tlTe  decedent 
might  have  done  if  living,  and  guardians  may  so  act  and  sign  for 
their  ward  or  wards." 

It  was  amended  by  Act  Aug.  3,  1892,  c.  3G0,  cited  above,  to  read  as 
follows : 

"That  whenever  any  association  shall  have  been  or  shall  be  placed 
in  the  hands  of  a  receiver,  as  provided  in  section  fifty-two  hundred  and 
thirty-four  and  other  sections  of  the  Revised  Statutes  of  the  T'uited 
States,  and  when,  as  provided  in  section  fifty-two  hundred  and  thirty- 
six  thereof,  the  Comptroller  of  the  Currency  shall  have  paid  to  each 
and  every  creditor  of  such  association,  not  including  shareholders,  who 
are  creditors  of  such  association,  whose  claim  or  claims  as  such  cred- 
itor shall  have  been  proved  or  allowed  as  therein  prescribed,  the  full 
amount  of  such  claims,  and  all  expenses  of  the  receivership  and  the 
redemption  of  the  circulating  notes  of  such  associatiop  shall  have  been 
provided  for  by  depositing  lawful  money  of  the  United  States  with 
the  Treasurer  of  the  United  States,  the  Comptroller  of  the  Currency 
shall  call  a  meeting  of  the  shareholders  of  such  association  by  giving 
notice  thereof  for  thirty  days  in  a  newspaper  published  in  the  town, 
city,  or  county  where  the  business  of  such  association  was  carried 
on,  or  if  no  newspaper  is  there  published,  in  the  newspaper  published 
nearest  thereto.  At  such  meeting  the  shareholders  shall  determine 
whether  the  receiver  shall  be  continued  and  shall  wind  up  the  affairs 
of  such  association,  or  whether  an  agent  shall  be  elected  for  that 
purpose,  and  in  so  determining  the  said  shareholders  shall  vote  by 
a  ballot  in  person  or  by  proxy,  each  share  of  stock  entitling  the 
holder  to  one  vote  and  the  majority  of  the  stock  in  value  and  number 
of  shares  shall  be  necessary  to  determine  whether  the  said  receiver 
shall  be  continued  or  whether  an  agent  shall  be  elected.  In  case 
such  majority  shall  determine  that  the  said  receiver  shall  be  con- 
tinued, the  said  receiver  shall  thereupon  proceed  with  the  execution 
of  his  trust  and  shall  sell,  dispose  of,  or  otherwise  collect  the  assets 
of  the  said  association  and  shall  possess  all  the  powers  and  authority, 
and  be  subject  to  all  the  duties  and  liabilities  originally  conferred 
or  imposed  upon  him  by  his  appointment  as  such  receiver,  so  far  as 
the  same  remain  applicable.  In  case  the  said  meeting  shall  by  'the 
vote  of  a  majority  of  the  stock  in  value  and  number  of  shares  de- 
termine that  an  agent  shall  be  elected,  the  said  meeting  shall  there- 
upon proceed  to  elect  an  agent,  voting  by  ballot,  in  person  or  by 
proxy,  each  share  of  stock  entitling  the  holder  to  one  vote,  and  the 
person  who  shall  receive  votes  representing  at  least  a  majority  of 
stock  in  value  and  number  shall  be  declared  the  agent  for  the  pur- 
poses hereinafter  provided,  and  whenever  any  of  the  shareholders  of 
the  association  shall,  after  the  election  of  such  agent,  have  executed 
and  filed  a  bond  to  the  satisfaction  of  the  Comptroller  of  the  Cur- 
rency, conditioned  for  the  payment  and  discharge  in  full  of  each  and 
every  claim  that  may  thereafter  be  proved  and  allowed  by  and  before 
a  competent  court,  and  for  the  faithful  performance  of  all  and  singu- 
lar the  duties  of  such  ti'ust,  the  Comptroller  and  the  receiver  shall 
thei;eupon  transfer  and  deliver  to  such  agent  all  the  undivided  or  un- 
collected  or- other  assets   of   such  association   then   remaining   in    the 


566  APPENDIX 

hands  or  subject  to  the  order  and  control  of  said  Comptroller  and 
said  receiver,  or  either  of  them;  and  for  this  purpose  said  Comptroller 
and  said  receiver  are  hereby  severally  empowered  and  directed  to 
execute  any  deed,  assignment,  transfer,  or  other  instrument  in  writ- 
ing that  may  be  necessary  and  proper,  and  upon  the  execution  and 
delivery  of  such  instrument  to  the  said  agent  the  said  Comptroller 
and  the  said  receiver  shall  by  virtue  of  this  act  be  discharged  from 
any  and  all  liabilities  to  such  association,  and  to  each  and  all  the 
creditors  and  shareholders  thereof.  Upon  receiving  such  deed,  as- 
signment, transfer,  or  other  instrument,  the  person  elected  such 
agent  shall  hold,  control,  and  dispose  of  the  assets  and  property  of 
such  association  which  he  may  receive  under  the  terms  hereof,  for 
the  benefit  of  the  shareholders  of  such  association,  and  he  may  in 
his  own  name,  or  in  the  name  of  such  association,  sue  and  be  sued, 
and  do  all  other  lawful  acts  and  things  necessary  to  finally  settle 
and  distribute  the  assets  and  property  in  his  hands,  and  may  sell, 
compromise,  or  compound  the  debts  due  to  such  association,  with  the 
consent  and  approval  of  the  circuit  or  district  court  of  the  United 
States  for  the  district  where  the  business  of  such  association  was 
carried  on,  and  shall  at  the  conclusion  of  his  trust  render  to  such 
district  or  circuit  court  a  full  account  of  all  his  proceedings,  receipts, 
and  expenditures  as  such  agent,  which  court  shall,  upon  due  notice, 
settle  and  adjust  such  accounts  and  discharge  said  agent  and  the 
sureties  upon  said  bond.  At  such  meeting,  held  as  hereinbefore  pro- 
vided, administrators  or  executors  of  deceased  shareholders  may  act 
and  sign  as  the  decedent  might  have  done  if  living,  and  guardians 
of  minors  and  trustees  of  other  persons  may  so  act  and  sign  for 
their  ward  or  wards  or  cestui  que  trust.  The  proceeds  of  the  assets 
or  property  of  any  such  association  which  may  be  undistributed  at 
the  time  of  such  meeting  or  may  be  subsequently  received  shall  be 
distributed  as  follows: 

"First.  To  pay  the  expenses  of  the  execution  of  the  trust  to  the 
date   of   such   payment. 

"Second.  To  repay  any  amount  or  amounts  which  have  been  paid 
in  by  any  shareholder  or  shareholders  of  such  association  upoxi  and 
by  reason  of  any  and  all  assessments  made  upon  the  stock  of  such 
association  by  the  order  of  the  Comptroller  of  the  Currency  in  ac- 
cordance with  the  provisions  of  the  statutes  of  the  United  States; 
and 

"Third.  The  balance  ratably  among  such  stockholders  in  propor- 
tion to  the  number  of  shares  held  and  owned  by  each.  Such  distribu- 
tion shall  be  made,  from  time  to  time,  as  the  proceeds  shall  be  re- 
ceived and  as  shall  be  deemed  advisable  by  the  said  Comptroller  or 
said   agent." 

It  is  again  amended  by  Act  March  2,  1897,  c.  354,  cited  above,  to 
read  as  set  forth  here. 

Provisions  relating  to  the  purchase  by  receivers  of  property  of  the 
banks  are  contained  in  Act  March  29,  1886,  c.  28,  set  forth  below. 

Sec.  4.     [Amends  Rev.  St.  §  5205.] 

Sec.  5.     [Relates  to  counterfeit  notes.] 
This   section  requires  all  counterfeit  notes  to  be   marked   with   the 
word  "counterfeit,"  "altered,"  or  "worthless,"  and  is  set  forth  ante, 
D.  477. 


ACTS  OF  CONGRESS  507 

Sec.  6.     [Relates  to  reports  of  savings  banks  or  savings 

and  trust  companies.] 

This  section  requires  all  savings  banks  or  savings  antitrust  com- 
panies organized  under  any  'act  of  Congro&s  to  make  rei)orts  to  the 
Comptroller,  and  is  set  forth  ante,  following  Rev.  St.  §  5213. 

ACT  MARCH  29,   1886,  c.  28. 

An  Act  Additional  to  "An  Act  to  Provide  a  National 
Currency  Secured  by  a  Pledge  of  United  States  Bonds, 
and  to  Provide  for  the  Circulation  and  Redemption 
Thereof"  Passed  June  Third,  Eighteen  Hundred  and 
Sixty-Four.     (24  Stat.  8.) 

Purchase  by  receiver  of  property  of  bank;  request  to 
Comptroller. — Be  it  enacted,  &c.,  That  whenever  the  re- 
ceiver of  any  national  bank  duly  appointed  by  the  Comp- 
troller of  the  Currency,  and  who  shall  have  duly  qualified 
and  entered  upon  the  discharge  of  his  trust,  shall  find  it  in 
his  opinion  necessary,  in  order  to  fully  protect  and  benefit 
his  said  trust,  to  the  extent  of  any  and  all  equities  that 
such  trust  may  have  in  any  property,  real  or  personal,  by 
reason  of  any  bond,  mortgage,  assignment,  or  other  proper 
legal  claim  attaching  thereto,  and  which  said  property  is 
to  be  sold  under  any  execution,  decree  of  foreclosure,  or 
proper  order  of  any  court  of  jurisdiction,  he  may  certify 
the  facts  in  the  case,  together  with  his  opinion  as  to  the 
value  of  the  property  to  be  sold,  and  the  value  of  the  eq- 
uitv  his  said  trust  may  have  in  the  same,  to  the  Comp- 
troller of  the  Currency,  together  with  a  request  for  the 
right  and  authority  to  use  and  employ  so  much  of  the 
money  of  said  trust  as  may  be  necessary  to  purchase  such 
property  at  such  sale. 

Act  March  29,  1SS6,  c.  28,  §  1,  24  Stat.  8.  , 

Approval  of  request. — Sec.  2.  That  such  request,  if  ap- 
proved by  the  Comptroller  of  the  ^Currency,  shall  be,  to- 
gether with  the  certificate  of  facts  in  the  case,  and  his  rec- 
ommendation as  to  the  amount  of  money  which,  in  his 
judgment,  should  be  so  used  and  employed,  submitted  to 
the  Secretary  of  the  Treasury,  and  if  the  same  shall  like- 
wise be  approved  by  him,  the  request  shall  be  by  the  Comp- 
troller of  the  Currency  allowed,  and  notice  thereof,  with 
copies  of  the  request,  certificate  of  facts,  and  indorsement 


oGS  APPENDIX 

of  approvals,  shall  be  filed  with  the  Treasurer  of  the  United 
States. 

Act  March  29,  1S86,  c.  28,  §  2,  24  Stat.  8.  i 

Payment.— Sec.  3.  That  whenever  any  such  request 
shall  be  allowed  as  hereinbefore  provided,  the  said  Comp- 
troller of  the  Currency  shall  be,  and  is,  empowered  to  draw 
upon  and  from  such  funds  of  any  such  trust  as  may  be  de- 
posited with  the  Treasurer  of  the  United  States  for  the 
benefit  of  the  bank  in  interest,  to  the  amount  as  may  be 
recommended,  and  allowed  and  for  the  purpose  for  which 
such  allowance  was  made:  Provided,  however.  That  all 
payments  to  be  made  for  or  on  account  of  the  purchase  of 
any  such  property  and  under  any  such  allowance  shall  be 
made  bv  the  -Comptroller  of  the  Currency  direct,  with  the 
approval  of  the  Secretary  of  the  Treasury,  for  such  purpose 
only  and  in  such  manner  as  he  may  determine  and  order. 
Act  March  29,  1886,  c.  28,  §  3,  24  Stat.  8. 

Sec.  5239.  Penalty  for  violation  of  this  Title.— If  the  di- 
rectors of  any  national  banking  association  shall  knowingly 
violate,  or  knowingly  permit  any  of  the  officers,  agents,  or 
servants  of  the  association  to  violate  any  of  the  provisions 
of  this  Title,  all  the  rights,  privileges,  and  franchises  of  the 
association  shall  be  thereby  forfeited.  Such  violation  shall, 
however,  be  determined  and  adjudged  by  a  proper  circuit, 
district,  or  territorial  court  of  the  United  States,  in  a  suit 
brought  for  that  purpose  by  the  Comptroller  of  the  Cur- 
rency, in  his  own  name,  before  the  association  shall  be  de- 
clared dissolved.  And  in  cases  of  such  violation,  every  di- 
rector who  participated  in  or  assented  to  the  sa^me  shall  be 
held  liable  in  his  personal  and  individual  capacity  for  all 
damages  which  the  association,  its  shareholders,  or  any  oth- 
,  er  person,  shall  have  sustained  in  consequence  of  such  vio- 
lation. 

Act  June  3,  1864,  c.  106,  §  53,  13  Stat.  116. 

See  note  under  Rev.  St.  §  5234. 

Sec.  5240.  [As  amended  1875.]  Appointment  of  occa- 
sional examiners;  [compensation.] — The  Comptroller  of 
the  Currency,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall,  as  often  as  shall  be  deemed  necessary  or 
proper,  appoint  a  suitable  person  or  persoijs  to  make  an 
examination   of  the   affairs   of  every   banking   association, 


ACTS  OF  CONGRESS  569 

who  shall  have  power  to  make  a  thorough  examination 
into  all  the  affairs  of  the  association,  and,  in  doing  so,  to 
examine  any  of  the  officers  and  agents  thereoi^jpn  oath ; 
and  shall  make  a  full  and  detailed  report  of  the  condition 
of  the  association  to  the  Comptroller.  That  all  persons  ap- 
pointed to  be  examiners  of  national  banks  not  located  in 
the  redemption-cities  specified  in  section  five  thousand  one 
hundred  and  ninety-two  of  the  Revised  Statutes  of  the 
United  States,  or  in  any  one  of  the  States  of  Oregon,  Cali- 
fornia, and  Nevada,  or  in  the  Territories,  shall  receive  com- 
pensation for  such  examination  as  follows :  For  examin- 
ing national  banks  having  a  capital  less  than  one  hundred 
thousand  dollars,  twenty  dollars;  those  having  a  capital  of 
one  hundred  thousand  dollars  and  less  than  three  hundred 
thousand  dollars,  twenty-five  dollars ;  those  having  a  cap- 
ital of  three  hundred  thousand  dollars  and  less  than  four 
hundred  thousand  dollars,  thirty-five  dollars;  those  having 
a  capital  of  four  hundred  thousand  dollars  and  less  than 
five  hundred  thousand  dollars,  forty  dollars;  those  having 
a  capital  of  five  hundred  thousand  dollars  and  less  than  six 
hundred  thousand  dollars,  fifty  dollars;  those  having  a 
capital  of  six  hundred  thousand  dollars  and  over,  seventy- 
five  dollars;  which  amounts  shall  be  assessed  by  the  Comp- 
troller of  the  Currency  upon,  and  paid  by,  the  respective 
associations  so  examined ;  and  shall  be  in  lieu  of  the  com- 
pensation and  mileage  heretofore  allowed  for  making  said 
examinations,  and  persons  appointed  to  make  examination 
of  national  banks  in  the  cities  named  in  section  five  thou- 
sand one  hundred  and  ninety-two  of  the  Revised  Statutes 
of  the  United  States,  or  in  any  one  of  the  States  of  Oregon, 
California,  and  Nevada,  or  in  the  Territories,  shall  receive  ' 
such  compensation  as  may  be  fixed  by  the  Secretary  of 
the  Treasury  upon  the  recommendation  of  the  Comptroller 
of  the  Currency;  and  the  same  shall  be  assessed  and  paid 
in  the  manner  hereinbefore  provided. 

Act  June  3,  1864,  c.  106,  §  54,  13  Stat.  116.  Act  Feb.  19,  1875,  c. 
89,  18  Stat.  329. 

This  section  is  amended  by  Act  Feb.  19,  1875,  c.  89,  cjted  above,  by 
striking  out;  after  the  words  "of  the  association  to  the  Comptroller," 
the  words:  "Every  person  appointed  to  make  such  examination  shall 
receive  for  his  services  at  the  rate  of  five  dollars  for  each  day  by  him 
employed  in  such  examination,  and  two  dollars  for  every  twenty-five 
miles  he  shall  necessarily  travel  in  the  performance  of  his  duty,  which 
shall  be  paid  by  the  association  by  him  examined.  But  no  person 
shall  be  appointed  to  examine  the  affairs  of  any  banking  association  of 


570  APPENDIX 

which  he  is  a  director  or  other  officer,"— and  by  substituting  therefor 
the  provisions  beginning  with  the  words,  "That  all  persons  appointed 
to  be  examiners,"  etc.,  to  the  end  of  the  section  as  set  forth  here. 

Sec.  5241.  Limit  of  visitorial  powers. — No  association 
shall  be  subject  to  any  visitorial  powers  other  than  such  as 
are  authorized  by  this  Title,  or  are  vested  in  the  courts  of 
justice. 

Act  June  3,  1864,  c.  106,  §  54,  13  Stat.  116. 

Sec.  5242.  Transfers,  when  void. — All  transfers  of  the 
notes,  bonds,  bills  of  exchange,  or  other  evidences  of  debt 
owing  to  any  national  banking  association,  or  of  deposits  to 
its  credit;  all  assignments  of  mortgages,  sureties  on  real 
estate,  or  of  judgments  or  decrees  in  its  favor;  all  deposits 
of  money,  bullion,  or  other  valuable  thing  for  its  use,  or 
for  the  use  of  any  of  its  shareholders  or  creditors ;  and  all 
payments  of  money  to  either,  made  after  the  commission 
of  an  act  of  insolvency,  or  in  contemplation  thereof,  made 
with  a  view  to  prevent  the  application  of  its  assets  in  the 
manner  prescribed  by  this  chapter,  or  with  a  view  to  the 
preference  of  one  creditor  to  another,  except  in  payment  of 
its  circulating  notes,  shall  be  utterly  null  and  void ;  and 
no  attachment,  injunction  or  execution,  shall  be  issued 
against  such  association  or  its  property  before  final  judg- 
ment in  any  suit,  action,  or  proceeding,  in  any  State,  coun- 
ty, or  municipal  court. 

Act  June  3,  1864,  c.  106,  §  52,  13  Stat.  115. 

Sec.  5243.  Use  of  the  title  "national." — All  banks  not 
organized  and  transacting  business  under  the  national-cur- 
rency laws,  or  under  this  Title,  and  all  persons  or  corpo- 
rations doing  the  business  of  bankers,  brokers,  or  savings 
institutions,  except  savings-banks  authorized  by  Congress 
to  use  the  Word  "national"  as  a  part  of  their  corporate 
name,  are  prohibited  from  using  the  word  "national"  as  a 
portion  of  the  name  or  title  of  such  bank,  corporation,  firm, 
or  partnership ;  and  any  violation  of  this  prohibition  com- 
mitted after  the  third  day  of  September,  eighteen  hundred 
and  seventy-three,  shall  subject  the  party  chargeable  there- 
with to  a  penalty  of  fifty  dollars  for  each  day  during  which 
it  is  committed  or  repeated. 

Act  March  3,  1873,  c.  269,  §  3,  17  Stat.  603. 


ACTS   OF   CONGRESS 


571 


CRIMES 


OFFENSES    AGAINST    THE    OPERA- 
TIONS    OF     GOVERNMENT. 
Sec. 
83.  National     banks     contributing     for 
political   elections;     penalty   for; 
additional    to    officers. 

OFFENSES      AGAINST      THE      CUR- 
RENCY,   ETC. 

147.  "Obligation  or  other  security  of  the 

United  States"  defined. 

148.  Forging    or    counterfeiting    United 

States  securities. 

149.  Counterfeiting  national-bank  notes. 

150.  Using  plates  to  print  notes  without 

authority,    etc. 

151.  Passing,    selling,    concealing,    etc., 

forged  obligations. 

152.  Taking    impressions    of    tools,    im- 

plements, etc. 

153.  Having    in    possession    unlawfully 

such  Impressions. 


Sec, 
154. 

174. 

175. 

176. 

177. 

178. 


Buying,  selling,  or  dealing  In  forg- 
ed bonds,    notes,  etc. 

Circulating  bills  of  expired  corpo- 
rations. 

Imitating  national-bank  notes  with 
printed  advertisements  thereon. 

Mutilating  or  defacing  national- 
bank  notes. 

Imitating  United  States  securities 
or  printing  business  cards  on 
them. 

Notes  of  less  than  one  dollar  not 
to  be  issued. 


OFFENSES    AGAINST    THE    POSTAL 
SERVICE. 

215.  Using    mails    to    promote    frauds; 

counterfeit  bank    notes,    etc. 

216.  Using  fraudulent  fictitious  address. 
Act  March  4,   1909,   c.  321. 


National  banks  contributing  for  political  elections;  pen- 
alty for;  additional  to  officers. — Sec.  83.  It  shall  be  un- 
lawful for  any  national  bank,  or  any  corporation  organized 
by  authority  of  any  law  of  Congress,  to  make  a  money  con- 
tribution in  connection  with  any  election  to  any  political 
office.  It  shall  also  be  unlawful  for  any  corporation  what- 
ever to  make  a  money  contribution  in  connection  with  any 
election  at  which  Presidential  and  Vice-Presidential  elec- 
tors or  a  Representative  in  Congress  is  to  be  voted  for,  or 
any  election  by  any  State  legislature  of-  a  United  States 
Senator.  Every  corporation  which  shall  make  any  con- 
tribution in  violation  of  the  foregoing  provisions  shall  be 
fined  not  more  than  five  thousand  dollars ;  and  every  offi- 
cer or  director  of  any  corporation  who  shall  consent  to  any 
contribution  by  the  corporation  in  violation  of  the  fore- 
going provisions  shall  be  fined  nqt  more  than  one  thousand 
dollars,  or  imprisoned  not  more  than  one  year,  or  both. 

Act  March  4,  1909,  c.   321,   §  S3,  35   Stat.   1103    (Comp.   St.   Sunn. 
1911,  p.  1613). 
See  Act  Jan.  26,  1907,  c.  420,  34  Stat.  804. 

"Obligation  or  other  security  of  the  United  States"  de- 
fined.— Sec.  147.  The  words  "obligation  or  other  security 
of  the  United  States"  shall  be  held  to  mean  all  bonds,  cer- 


n72  APPENDIX 

tificates  of  indebtedness,  national-bank  currency,  coupons, 
United  States  notes,  Treasury  notes,  gold  certificates,  sil- 
ver certificates,  fractional  notes,  certificates  of  deposit,  bills, 
checks,  or  drafts  for  money  drawn  by  or  upon  authorized 
officers  of  the  United  States,  stamps  and  other  represent- 
atives of  value,  of  whatever  denomination,  which  have  been 
or  mav  be  issued  under  any  Act  of  Congress. 

Act 'March  4,  1909,  c.  321,  §  147,  35  Stat.  1115. 

See  Rev.  St.  §  5413,  Comp.  St.  1901,  p.  36G2,  Supp.  1911,  p.  1631. 

Forging  or  counterfeiting  securities;  punishment  for. — 
Sec.  148.  Whoever,  with  intent  to  defraud,  shall  falsely 
make,  forge,  counterfeit,  or  alter  any  obligation  or  other 
security  of  the  United  States  shall  be  fined  not  more  than 
five  thousand  dollars  and  imprisoned  not  more  than  fifteen 
years. 

Act  March  4,  1909,  c.  321,  §  148,  35  Stat.  1115. 

See  Rev.  St.  §  5414,  Comp.  St.  1901,  p.  3GG2,  Supp.  1911,  p.  1631. 

Counterfeiting  national-bank  notes;  punishment  for. — 
Sec.  149,  Whoever  shall  falsely  make,  forge,  or  counter- 
feit, or  cause  or  procure  to  be  made,  forged,  or  counter- 
feited, or  shall  willingly  aid  or  assist  in  falsely  making, 
forging,  or  counterfeiting,  any  note  in  imitation  of,  or  pur- 
porting to  be  in  imitation  of,  the  circulating  notes  issued 
by  any  banking  association  now  or  hereafter  authorized 
and  acting  under  the  laws  of  the  United  States ;  or  who- 
ever shall  pass,  utter,  or  publish,  or  attempt  to  pass,  utter, 
OT  publish,  any  false,  forged  or  counterfeited  note  purport- 
ing to  be  issued  by  any  such  association  doing  a  banking 
business  knowing  the  same  to  be  falsely  made,  forged,  or 
counterfeited ;  or  whoever  shall  falsely  alter,  or  cause  or 
procure  to  be  falsely  altered,  or  shall  willingly  aid  or  as- 
sist in  falsely  altering,  any  such  circulating  notes,  or  shall 
pass,  utter,  or  publish,  or  attempt  to  pass,  utter,  or  publish 
as  true  any  falsely  altered  or  spurious  circulating  note  is- 
sued, or  purporting  to  have  been  issued,  by  any  such  bank- 
ing association,  knoAving  the  same  to  be  falsely  altered  or 
spurious,  shall  be  fined  not  more  than  one  thousand  dollars 
and  imprisoned  not  more  than  fifteen  years. 
Act  March  4,  1909,  c.  321,  §  149,  .35  Stat.  1115. 
See  Rev.  St.  §  5415,  Comp.  St.  1901,  p.  3662,  Supp.  1911,  p.  1631. 

Using  plates  to  print  notes  without  authority,  etc.;  dis- 
tinctive paper  without  authority;  punishment  for. — Sec. 
150.     Whoever,  having  control,  custody,  or  possession  of 


ACTS  OF   CONGKESS  573 

any  plate,  stone,  or  other  thing-,  or  any  part  thereof,  from 
which  has  been  printed  or  which  may  be  prepared  by  direc- 
tion of  the  Secretary  of  the  Treasury  for  the  purpose  of 
printing,  any  obHgation  or  other  security  of  Hte  United 
States,  shall  use  such  plate,  stone,  or  other  thing,  or  any 
part  thereof,  or  knowingly  suffer  the  same  to  be  used  for 
the  purpose  of  printing  any  such  or  similar  obligation  or 
other  security  or  any  part  thereof,  except  as  may  be  printed 
for  the  use  of  the  United  States  by  order  of  the  proper  offi- 
cer thereof;  or  whoever  by  any  way,  art,  or  means  shall 
make  or  execute,  or  cause  or  procure  to  be  made  or  exe- 
cuted, or  shall  assist  in  making  or  executing  any  plate, 
stone,  or  other  thing  in  the  likeness  of  any  plate  designated 
for  the  printing  of  such  obligation  or  other  security  ;  or 
whoever  shall  sell  any  such  plate,  stone,  or  other  thing, 
or  bring  into  the  United  States  or  any  place  subject  to  the 
jurisdiction  thereof,  from  any  foreign  place,  any  such  plate, 
stone,  or  other  thing,  except  under  the  direction  of  the 
Secretary  of  the  Treasury  or  other  proper  officer,  or  with 
any  other  intent,  in  either  case,  than  that  such  plate,  stone, 
or  other  thing  be  used  for  the  printing  of  the  obligations 
or  other  securities  of  the  United  States;  or  whoever  shall 
have  in  his  control,  custody,  or  possession  any  plate,  stone, 
or  other  thing  in  any  manner  made  after  or  in  the  simili- 
tude of  any  plate,  stone,  or  other  thing,  from  which  any 
such  obligation  or  other  security  has  been  printed,  with 
intent  to  use  such  plate,  stone,  or  other  thing,  or  to  suffer 
the  same  to  be  used  in  forging  or  counterfeiting  any  such 
obligation  or  other  security  or  any  part  thereof;  or  who- 
ever shall  have  in  his  possession  or  custody,  except  under 
authority  from  the  Secretary  of  the  Treasury  or  other  prop- 
er officer,  any  obligation  or  other  security  made  or  exe- 
cCited,  in  whole  or  in  part,  after  the  similitude  of  any  obli- 
gation or  other  security  issued  under  the  authority  of  the 
United  States,  with  intent  to  sell  or  otherwise  use  'the 
same ;  or  whoever  shall  print,  photograph,  or  in  any  other 
manner  make  or  execute,  or  cause  to  be  printed  photo- 
graphed, made,  or  executed,  or  shall  aid  in  printing,  pho- 
tographing, making,  or  executing  any  engraving,  photo- 
graph, print,  or  impression  in  the  likeness  of  any  such  obli- 
gation or  other  security,  or  an}^  part  thereof,  or  shall  sell 
any  such  engraving,  photograph,  print,  or  impression,  ex- 
cept to  the  United   States  or  shall  bring  into  the  United 


574  APPENDIX 

States  or  anv  place  subject  to  the  jurisdiction  thereof,  from 
anv  foreign 'place  any  such  engraving,  photograph,  print, 
or'impression,  except  by  direction  of  some  proper  officer 
of  the  United  States;  or  whoever  shall  have  or  retam  m 
his  control  or  possession,  after  a  distinctive  paper  has  been 
adopted  bv  the  Secretary  of  the  Treasury  for  the  obliga- 
tions and  other  securities  of  the  United  States,  any  similar 
paper  adapted  to  the  making  of  any  such  obligation  or 
other  security,  except  under  the  authority  of  the  Secretary 
of  the  Treasury  or  some  other  proper  officer  of  the  United 
States,  shall  be  fined  not  more  than  five  thousand  dollars, 
or  imprisoned  not  more  than  fifteen  years,  or  both. 

Act  March  4,  1909.  c.  321,  §  150,  35  Stat.  1116. 

See  Rev.  St.  §  54.30,  Comp.  St.  1901,  p.  3671,  Supp.  1911,  p.  1032. 

Uttering,  etc.,  forged  obligations;  punishment  for. — Sec. 
151.  Whoever,  with  intent  to  defraud,  shall  pass,  utter, 
publish,  or  sell,  or  attempt  to  pass,  utter,  publish,  or  sell, 
or  shall  bring  into  the  United  States  or  any  place  subject 
to  the  jurisdiction  thereof  with  intent  to  pass,  publish,  ut- 
ter, or  sell,  or  shall  keep  in  possession  or  conceal  with  like 
intent,  any  falsely  made,  forged,  counterfeited,  or  altered 
obligation  or  other  security  of  the  United  States,  shall  be 
fined  not  more  than  five  thousand  dollars  and  imprisoned 
not  more  than  fifteen  years. 

Act  March  4,  1909,  c.  321,  §  151.  35  Stat.  1116. 

See  Rev.  St.  §  5431,  Comp.  St.  1901.  p.  3671.  Supp.  1911,  p.  1633. 

Taking  impressions  of  tools,  implements,  etc.;  punish- 
ment for. — Sec.  152.  Whoever,  without  authority  from 
the  United  States,  shall  take,  procure,  or  make,  upon  lead, 
foil,  wax,  plaster,  paper,  or  any  other  substance  or  material, 
an  impression,  stamp,  or  imprint  of,  from,  or  by  the  use  of 
any  bedplate,  bedpiece,  die,  roll,  plate,  seal,  type,  or  other 
tool,  implement,  instrument,  or  thing  used  or  fitted  or  in- 
tended to  be  used  in  printing,  stamping,  or  impressing,  or 
in  making  other  tools,  implements,  instruments,  or  things 
to  be  used  or  fitted  or  iritended  to  be  used  in  printing, 
stamping,  or  impressing  any  kind  or  description  of  obliga- 
tion or  other  security  of  the  United  States  now  authorized 
or  hereafter  to  be  authorized  by  the  United  States,  or  cir- 
culating note  or  evidence  of  debt  of  any  banking  associa- 
tion under  the  laws  thereof,  shall  be  fined  not  more  than 


ACTS  OF  CONGRESS  575 

five  thousand  dollars,  or  imprisoned  not  more  than  ten 
years,  or  both. 

Act  March  4,  litOO.  o.  G21,  §  152.  35  Stat.  1117. 

See  Kev.  St.  §  5432,  Comp.  St.  1901,  p.  ;!072.  Supp.  inn,  p.  1G3.3. 

Having  unlawful  possession  of  impressions ;   punishment 

for. — Sec.  153.  Whoever,  with  intent  to  defraud,  shall 
have  in  his  possession,  keeping,  custody,  or  control,  with- 
out authority  from  the  United  States,  any  imprint,  stamp, 
or  impression  taken  or  made  upon'  any  substance  or  ma- 
terial whatsoever  of  any  tool,  implement,  instrument,  or 
thing,  used,  or  fitted  or  intended  to  be  used,  for  any  of 
the  purposes  mentioned  in  the  preceding  section ;  or  who- 
ever, with  intent  to  defraud,  shall  sell,  give,  or  deliver  any 
such  imprint,  stamp,  or  impression  to  any  other  person, 
shall  be  fined  not  more  than  five  thousand  dollars  or  im- 
prisoned not  more  than  ten  years,  or  both. 

Act  March  4,  1909,  c.  321,  §  153,  35  Stat.  1117. 

See  Rev.  St.  §  5433.  Comp.  St.  1901,  p.  .3072,  Snpp.  1911,  p.  1633. 

Dealing  in  counterfeit  securities;  punishment  for. — Sec. 
154.  Whoever  shall  buy,  sell,  exchange,  transfer,  receive, 
or  deliver  any  false,  forged,  counterfeited  or  altered  obli- 
gation or  other  security  of  the  United  States  or  circulating 
note  of  any  banking  association  organized  or  acting  under 
the  laws  thereof,  which  has  been  or  may  hereafter  be  is- 
sued by  virtue  of  any  Act  of  Congress,  with  the  intent  that 
the  same  be  passed,  published,  or  used  as  true  and  genu- 
ine, shall  be  fined  not  more  than  five  thousand  dollars,  or 
imprisoned  not  more  than  ten  years,  or  both. 

Act  March  4,  1909,  c.  321,  §  154.  35  Stat.  1117. 

See  Rev.  St.  §  5434,  Comp.  St.  1901,  p.  -3073,  Supp.  1911.  p.  1633. 

Circulating  bills  of  expired  banks ;  punishment  for ;  cir- 
culation permitted. — Sec.  174.  In  all  cases  where  the  char- 
ter of  any. corporation  which  has  been  or  may  be  created 
by  Act  of  Congress  has  expired  or  may  hereafter  expire,  if 
any  director,  officer,  or  agent  of  the  corporation,  or  any 
trustee  thereof,  or  any  agent  of  such  trustee,  or  any  person 
having  in  his  possession  or  under  his  control  the  property 
of  the  corporation  for  the  purpose  of  paying  or  redeeming 
its  notes  and  obligations,  shall  knowingly  issue,  reissue, 
or  utter  as  money,  or  in  any  other  way  knowingly  put  in 
circulation  any  bill,  note,  check,  draft  or  other  security 
purporting  to   have  been   made   by   any   such   corporation 


576  APPENDIX 

whose  charter  has  expired,  or  by  any  officer  thereof,  or  pur- 
porting to  have  been  made  under  authority  derived  there- 
from, or  if  any  person  shall  knowingly  aid  in  any  such  act, 
he  shall  be  fined  not  more  than  ten  thousand  'dollars,  or 
imprisoned  not  more  than  five  years,  or  both.  But  nothing 
herein  shall  be  construed  to  make  it  unlawful  for  any  per- 
son, not  being  such  director,  officer,  or  agent  of  the  cor- 
poration, or  any  trustee  thereof,  or  any  agent  of  such  trus- 
tee, or  any  person  having  in  his  possession  or  under  his 
control  the  property  of  the  corporation  for  the  purpose 
hereinbefore  set  forth,  who  has  received  or  may  hereafter 
receive  such  bill,  note,  check,  draft,  or  other  security,  bona 
fide  and  in  the  ordinary  transactions  of  business,  to  utter 
as  mone}'  or  otherwise  circulate  the  same. 

Act  INIarch  4,  lt)09,  c.  321,  §  174,  35  Stat.  1122. 

See  Rev.  St.  §  5437,  Comp.  St.  1901,  p.  3673,  Supp.  1911,  p.  1640. 

Imitating  national-bank  notes  with  advertisements  there- 
on; punishment  for. — Sec.  175.  It  shall  not  be  lawful  to 
design,  engrave,  print,  or  in  any  manner  make  or  execute, 
or  to  utter,  issue,  distribute,  circulate  or  use  any  business 
or  professional  card,  notice,  placard,  circular,  handbill,  or 
advertisement  in  the  likeness  or  similitude  of  any  circu- 
lating note  or  other  obligation  or  security  of  any  banking 
association  organized  or  acting  under  the  laws  of  the  Unit- 
ed States  which  has  been  or  may  be  issued  under  any  Act 
of  Congress  or  to  write,  print,  or  otherwise  impress  upon 
any  such  note,  obli-gation,  or  security,  any  business  or  pro- 
fessional card,  notice  or  advertisement,  or  any  notice  or 
advertisement  of  any  matter  or  thing  whatever.  Whoever 
shall  violate  any  provision  of  this  section  shall  be  fined  not 
more  than  one  hundred  dollars,  or  imprisoned  not  more 
than  six  months,  or  both. 

Act  March  4,  1909,  c.  321,  §  175,  35  Stat.  1122. 

See  Rev.  St.  §  5188,  Comp.  St.  1901,  p.  3484,  ante,  p.  529. 

Mutilating,  etc.,  national-bank  notes;  punishment  for. — 
Sec.  176.  Whoever  shall  mutilate,  cut,  deface,  disfigure, 
or  perforate  with  holes,  or  unite  or  cement  together,  or 
do  any  other  thing  to  any  bank  bill,  draft,  note,  or  other 
evidence  of  debt,  issued  by  any  national  banking  associa- 
tion, or  shall  cause  or  procure  the  same  to  be  done,  with 
intent  to  render  such  bank  bill,  draft,  note,  or  other  evi- 
dence of  debt  unfit  to  be  reissued  by  said  association,  shall 


ACTS   01''   CONGUIiSS  577 

be  fined  not  more  than  one  hundred  dollars,  or  imprisoned 
not  more  than  six  months,  or  both. 

Act  March  4,  1901),  c.  321,  §  176,  35  Stat.  1122. 

See  Rev.  St.  §  5189,  Comp.  St.  1901,  p.  3484,  ante,  p.  529. 

Imitating  securities  or  printing  advertisements  thereon; 
punishment  for. — Sec.  177.  It  shall  not  be  lawful  to  de- 
sign, engrave,  print,  or  in  any  manner  make  or  execute,  or 
to  utter,  issue,  distribute,  circulate,  or  use,  any  business  or 
professional  card,  notice,  placard,  circular,  handbill,  or  ad- 
vertisement, in  the  likeness  or  similitude  of  any  bond,  cer- 
tificate of  indebtedness,  certificate  of  deposit,  coupon.  Unit- 
ed States  note.  Treasury  note,  gold  certificate,  silver  cer- 
tificate, fractional"  note,  or  other  obligation  or  security  of 
the  United  States  which  has  been  or  may  be  issued  under 
or  authorized  by  any  Act  of  Congress  heretofore  passed 
or  which  may  hereafter  be  passed ;  or  to  write,  print,  or 
otherwise  impress  upon  any  such  instrument,  obligation, 
or  security,  any  business  or  professional  card,  notice,  or 
advertisement,  or  any  notice  or  advertisement  of  any  mat- 
ter or  thing  whatever.  Whoever  shall  violate  any  provi- 
sion of  this  section  shall  be  fined  not  more  than  five  hun- 
dred dollars. 

Act  March  4,  1909,  c.  321,  §  177,  35  Stat.  1122. 

See  Rev.  St.  §  3708,  Comp.  St.  1901,  p.  2482,  Supp.  1911,  p.  1641. 

Issuing  notes  less  than  one  dollar;  punishment  for, — Sec. 
178.  No  person  shall  make,  issue,  circulate,,  or  pay  out  any 
note,  check,  memorandum,  token,  or  other  obligation  for  a 
less  sum  than  one  dollar,  intended  to  circulate  as  money 
or  to  be  received  or  used  in  lieu  of  lawful  money  of  the 
United  States ;  and  every  person  so  offending  shall  be  fined 
not  more  than  five  hundred  dollars,  or  imprisoned  not  more 
than  six  months,  or  both. 

Act  March  4,  1909,  c.  321,  §  178,  35  Stat.  1122. 

See  Rev.  St.  §  3.583,  Comp.  St.  1901,  p.  2398,  Supp.  1911,  p.  1641. 

Using  mails  to  promote  frauds;  counterfeit  bank  notes, 
etc.;  punishment  for. — Sec.  215.  Whoever,  having  devised 
or  intending  to  devise  any  scheme  or  artifice  to  defraud, 
or  for  obtaining  -money  or  property  by  means  of  false 
or  fraudulent  pretenses,  representations,  or  promises,  or 
to  s'ell,  dispose  of,  loan,  exchange,  alter,  give  away,  dis- 
tribute, supply,  or  furnish  or  procure  for  unlawful  use  any 
counterfeit  or  spurious  coin,  bank  note,  paper  money,  or 
Tiff.Bks.&  B.— 37 


578  APrENDix ' 

any  obligation  or  security  of  the  United  States,  or  of  any 
State,  Territory,  municipality,  company,  corporation,  or 
person,  or  anything  represented  to  .be  or  intimated  or 
held  out  to  be  such  counterfeit  or  spurious  article,  or  any 
scheme  or  artifice  to  obtain  money  by  or  through  corre- 
spondence, by  what  is  commonly  called  the  "saw-dust 
swindle,"  or  "counterfeit-money  fraud,"  or  by  dealing  or 
pretending  to  deal  in  what  is  commonly  called  "green  ar- 
ticles," "green  coin,"  "green  goods,"  "bills,"  "paper  goods," 
"spurious  Treasury  notes,"  "United  States  goods,"  "green 
cigars,"  or  any  other  names  or  terms  intended  1?o  be  un- 
derstood as  relating  to  such  counterfeit  or  spurious  arti- 
cles, shall,  for  the  purpose  of  executing  such  scheme  or  ar- 
tifice or  attempting  so  to  do.  place,  or  cause  to  be  placed, 
any  letter,  postal  card,  package,  writing,  circular,  pam- 
phlet, or  advertisement,  whether  addressed  to  any  person 
residing  within  or  outside  the  United  States  in  any  post- 
office,  or  station  thereof,  or  street  or  other  letter  box  of 
the  United  States,  or  authorized  depository  for  mail  mat- 
ter, to  be  sent  or  delivered  by  the  post-office  establishment 
of  the  United  States,  or  shall  take  or  receive  any  such 
therefrom,  whether  mailed  within  or  without  the  United 
States,  or  shall  knowingly  cause  to  be  delivered  b)^  mail 
according  to  the  direction  thereon,  or  at  the  place  at  which 
it  is  directed  to  be  delivered  by  the  person  to  whom  it  is 
addressed,  any  such  letter,  postal  card,  package,  writing, 
circular,  pamphlet,  or  advertisement,  shall  be  fined  not 
more  than  one  thousand  dollars,  or  imprisoned  not  more 
than  five  years,  or  both. 

Act  March  4,  1909.  c.  321,  §  215,  35  Stat.  1130. 

See  Kev.  St.  §  5480,  as  amended  by  Act  March  2,  1889,  c.  393,  §  1, 
Comp.  St.  1901,  p.  3696,  Supp.  1911,  p.  1653. 

Using  fraudulent  fictitious  address. — Sec.  216.  Who- 
ever, for  the  purpose  of  conducting,  promoting,  or  carrying 
on,  in  any  manner,  by  means  of  the  post-office  establish- 
ment of  the  United  States,  any  scheme  or  device  men- 
tioned in  the  section  last  preceding  or  any  other  unlawful 
business  whatsoever,  shall  use  or  assume,  or  request  to  be 
addressed  by,  any  fictitious,  false,  or  assumed  title,  name, 
or  address,  or  name  other  than  his  own  proper  name,  or 
shall  take  or  receive  from  any  post-office  of  the  United 
States,  or  station  thereof,  or  any  other  authorized  deposi- 
tory of  mail 'matter,  any  letter,  postal  card,  package,  or 


ACTS    OF    CONGKESS  579 

Other  mail  matter  addressed  to  any  such  fictitious,  false,  or 
assumed  title,  name,  or  address,  or  name  other  than  his 
own  proper  name,  shall  be  punished  as  provided  in  the  sec- 
tion last  preceding.  "^^ 

Act  March  4,  1900,  c.  321,  §  216,  35  Stat.  1131. 

See  Act  Manh  2,  1S89,  c.  393,  §  2,  Comp.  St.  1901,  p.  3G9S,  Supu 
1911,  p.  1654. 


TABLE  OF   CASES   CffED 


[the  figures  refer  to  pages.] 


Abbott  V.  Jack,  78,  321. 

Abbott     V.     Wolfeborough     Sav. 

Bank,  449. 
Ackenhausen     v.     People's     Sav. 

Bank,  443,  452. 
Ackerman  v.  Halsey,  401. 
Adams  v.  First  Nat.  Bank,  70. 
Adams  v.  Hackensack  Imp.  Com- 
mission, 59,  191. 
Adams  v.  Jones,  56. 
Adams   v.  Orange   County   Bank, 

91,  93. 
Adams  v.  Spokane  Drug  Co.,  425. 
Aebi    V.   Bank   of   E^'ansville,  36, 

123. 
^^tna  Nat.  Bank  v.  Fourth  Nat, 

Bank,  58,  128. 
Aguew  V.  U.  S.,  408,  409. 
Akin  V.  Jones,  128,  206,  208. 
Alabama    Grocery    Co.    v.    First 

Nat.  Bank,  40. 
Albany  County  v.  Stanley,  439. 
Albany  County  Bank  v.  People's 

Co-operative  Ice  Co.,  41. 
Albers   v.   Commercial   Bank,   95, 

148,  153. 
Aldrich  v.  Bingham,  389. 
Aldrich   v.    Chemical   Nat.    Bank, 

283,  318,  420. 
Aldrich  v.  Yates,  394. 
Alexander  v.  Brummett,  250. 
Alexander  v.  Burchfield,  109. 
Alger  V.   North  EJnd   Sav.   Bank, 

456. 


Allen  V.  Brown,  69. 

Allen    V.    Frcodinan's    Savings   & 

Trust  Co.,  248. 
AJlen  v.  Luke.  400,  402,  404. 
Allen  V.  Merchants'  Bank  of  City 

of   New   York,  215. 
Allen  V.  Kramer,  114. 
Allen  V.  South  Boston  R,  Co.,  339. 
Allis  V.  U.  S.,  411. 
Allison  V.  Hubbell,  319. 
Alston  V.   State,  15,  23. 
American  Bank  v.  Wall,  259. 
American  Bible  Soc.  v.  Pratt,  55. 
American    Exch.    Nat.    Bank    v. 

First  Nat.  Bank,  312. 
American    Exch.    Nat.    Bank    v. 

Gregg,  38,  82,  146. 
American    Exch.     Nat.    Bank    v. 

Loretta  Gold  &  Silver  Min.  Co., 

20. 
American    Exch.    Nat.    Bank    of 

Chicago  V.  Theummler,  222. 
American  Exp.  Co.  v.  State  Nat. 

Bank,  164. 
American   Nat.  Bank  v.   Hender- 
son, 252. 
American    Nat.    Bank    v.    Morey, 

144.  146. 
American  Nat.  Bank  v.  National 

Wall  Paper  Co.,  276.  291. 
American  Nat.  Bank  v.  Williams, 

420. 
American  Nat.  Bank  of  Arkansas 

City  V.  Prosnall,  20,  27. 
American  Nat.  Bank  of  Macon  v. 

Fidelity  &  Deposit  Co.,  157. 


Tiff.Bks.&  B. 


(581) 


582 


CASES   CITED 
[The  figures  refer  to  pages] 


American  Nat.  Bank  of  Nashville, 
Tenn.,  v.  Miller,  14S. 

American  Surety  Co.  v.  Pauly, 
330.  388. 

American  Trust  &  Banking  Co.  v. 
Boone,  46,  68,  155. 

American  Trust  &  Savings  Bank 
V.  Gueder  &  Paeschke  Mfg.  Co., 
35.  351. 

Ames  V.  Meriam,  126. 

Amsinck  v.  Rogers,  98,  200. 

Anderson  v.  Gill,  110,  202. 

Anderson  v.   Kissam,  325. 

Anderson  v.  Leverich,  95. 

Anderson  v.  Philadelphia  Ware- 
house Co.,  385. 

Anderson  v.  Rodgers,  114. 

Andrews  v.  German  Nat.  Bank, 
132.  137. 

Andrews  v.  Northwestern  Nat. 
Bank,  172. 

Andrews  v.  State  Bank  of  Wheat- 
land, 26. 

Andrews  v.  Thum,  431. 

Andrus  v.  Bradley,  108. 

Angaletos  v.  Meridian  Nat.  Bank, 
111. 

Anheuser-Busch  Brewing  Ass'n  v. 
Estate  of  Farmers'  &  Mer- 
chants' Bank,  207. 

Anheuser-Busch  Brewing  Co.  v. 
Clayton,  206. 

Anonymous,  350. 

Anthony  v.  International  Bank, 
268. 

Appleby  v.  Erie  County  Sav. 
Bank,  453. 

Appleton  V.  Citizens'  Cent.  Nat. 
Bank  of  New  York,  285,  286. 

Arbogast  v.  American  Exch.  Nat. 
Bank,  315. 

Arkansas  Valley  &  W.  R.  Co.  v. 
Farmers'  &  Merchants'  Bank, 
288. 

Armat  v.  Union  Bank  of  George- 
town, 264. 

Armour-Cudahy  Packing  Co.  v. 
First  Nat.  Bank,  46,  69. 


Armour  Packing  Co.  v.  Davis,  33, 

34. 
Armstrong,  In  re,  424. 
Armstrong  v.  American  Exch.  Nat. 

Bank,  77. 
Armstrong  v.  Brolaski,  117. 
Armstrong  v.  Chemical  Nat.  Bank, 

211,  313,  424. 
Armstrong  v.  National  Bank,  69. 
Armstrong   v.    National    Bank   of 

Boyertown,  32,  33,  210. 
Armstrong  v.  Pomeroy  Nat.  Bank, 

174. 
Armstrong  v.   Second  Nat.  Bank. 

271. 
Armstrong    v.    Warner,    73,    353, 

425. 
Arnold  v.   Hart,   56. 
Arnold  V.  Niess,  74. 
Asher  v.  Sutton,  314,  .324. 
Aspey  V.  Whittemore.  368. 
Aspinwall  v.  Rutler,  370.  371. 
Assaria   State  Bank  v.  Dolley.  8. 
Atkinson    v.    Rochester    Printing 

Co.,  347,  348,  358. 
Atlanta  Nat.  Bank  v.  Burke,  60, 

90,  171. 
Atlanta  Nat.  Bank  y.  Davis,  140. 
Atlantic    Cotton    Mills    v.    Indian 

Orchard  Mills,  343,  344. 
Atlantic  Nat.  Bank  v.  Harris,  367. 
Atlantic   State    Bank   of   City    of 

Brooklyn    v.    Savery,   230,    232, 

337. 
Atlas  Nat,  Bank  v.  National  Exch. 

Bank,  183,  184. 
Attorney    General   v.    Continental 

Life  Ins.  Co.,  128. 
Attorney    General    v.    Utica    Ins. 

Co.,  8. 
Atwood  V.  Cornwall,  258. 
Auburn  Sav.  Bank  v.  Briukerhoff. 

445. 
Augsbury  v.   Shurtliff,  460. 
x\ugust  V.  Fourth  Nat.  Bank,  94, 

95. 
Augusta  Sav.  Bank  v.  Fogg,  459. 


CASES   CITED 
[The  figures  refer  to  pages] 


583 


Aurora  Nat.  Bank  v.  Dils,  56.  G2, 

94. 
Austin  V.  Board  of  Aldermen  of 

City  of  Boston,  438. 
Austin  V.  Daniels,  298. 
Anton  V.  Crahan.  86. 
Auton  V.  United  States  Nat.  Bank, 

234.  283,  31().  432. 
Ayer  v.  liuirlies.  284. 
Ayniar  v.  .Sheldon,  199. 
Ayrault  v.  Pacific  Bank,  199,  215. 

B 

Bacon  v.  Farmers'  Bank,  285. 
Bacon  v.  U.  S.,  410. 
Bacon's  Acliu'r   v.   Bacon's    Trus- 
tees. 71,  211. 
Bailey  v.  Bodenham,  113. 
Bailey    v.    Farmers'    Nat.    Bank, 

285. 
r.ailey  v.  Mosher,  402. 
Bailie  v.  Augusta  .Sav.  Bank,  34, 

194,  215. 
Baird    v.    Bank    of    Washington, 

310. 
Baker  v.  Beach.  387. 
Baker  v.  Leland.  81. 
Baker   v.    New   York    Nat.    Exch. 

Bank,  67. 
Baker  v.   Reeves,   391. 
Ealbach  v.  Frelinghuysen,  13,  31, 

32.  36,  38. 
Baldwin    v.    Bank    of    Louisiana, 

198. 
Baldwin  v.  Bank  of  Newbury,  326. 
Baldwin  y.  Davis,  334. 
Baldwin's  Estate,  In  re,  76. 
Ballard  v.  Greenbush,  260. 
Eallston    Spa    Bank    v.    Marine 

Bank,  .322. 
Baltimore   &   O.   R.   Co.   v.    First 

Nat.  Bank,  1.39. 
Bangor    Sav.    Bank    v.    Wallace, 

447. 
Bank    of    Alexandria    v.    Maude- 

ville,  236,  237 


Bank  of  America  v.  Waydcll.  .33, 

223  2''4 
Bank   of   Antigo   v.—fjuion  Trust 

Co.,   147,  202,  235. 
Bank  of  Augusta  v.  Earle,  8,  270. 
Bank    of    Bethel    v.    Pahquioque 

Bank,  41.5,  419. 
Bank  of  Blackwell   v.  Dean,   13, 

349. 
Bank   of  "British   North  America 

v.   Cooper,  20. 
Bank    of  British   North   America 

V.    Merchants'    Nat.    Bank.    94, 

134.  171. 
Bank  of  California  v.  San  Fran- 
cisco, 8. 
Bank  of  Clarke  County  v.  Gilman, 

209.  218,  221.  ^ 
Bank   of  Commerce   v.   Franklin, 

67. 
Bank  of  Conmierce  v.  Goos,  146. 
Bank  of  Commerce  v.   Harrison, 

81. 
Bank  of  Commerce  v.  Hart,  277, 

.324. 
Bank  of  Commerce  v.  Union  Bank, 

167,  168. 
Bank     of    'Delaware     County     v. 

Broomhall.  194. 
Bank  of  East  Tennessee  v.  Hooke, 

Bank  of  England  v.  Vagliano 
Bros.,  174. 

Bank  of  Genesee  v.  Patchin  Bank, 
325,  326. 

Bank  of  Gloster  v.  Hindman,  325. 

Bank  of  Greensboro  v.  Clapp,  46, 
67. 

Bank  of  Guntersville  v.  Jones 
Cotton  Co.,  2,54. 

Bank  of  Kentucky  v.Iiickey,  262. 

Bank  of  Kentucky  v.  Wister.  59. 

Bank  of  Lawrenceville  v.  Rock- 
more  &  Co.,  26. 

Bank  of  Lindsborg  v.  Ober  & 
Hageman,  199. 

Bank  of  Litchfield  v.  Elliott,  254. 


584 


-      CASES   CITED 
[The  figures  refer  to  pages] 


Bank  of  Louisiana  v.  Birscoe,  236. 
Bank  of  Louisville  v.  First  Nat. 

Bank,  198. 
Bank  of   Louisville  v.   Summers, 

2G3. 
Bank  of  Marietta  v.  Pindall,  273. 
Bank  of  Martinez  v.  Hemme  Or- 
chard &  Land  Co.,  5,  250. 
Bank  of  Marysville  v.  Windiscb- 
Muhlhauser    Brevping    Co.,    13, 
63,  66. 
Bank  of  Metroi>olis  v.  New  Eng- 
land Bank,  210,  222. 
Bank  of  Michigan,  President,  etc., 

of,  V.  Niles,  280,  291. 
Bank  of  Middlebury  v.  Bingham, 

227. 
Bank  of  Missouri  v.  Benoist,  91. 
Bank  of  ilobile  v.  Brown,  105. 
Bank  of  Mobile  v.  Huggins,  196. 
Bank  of  Mobile  v.  Meagher,  263. 
Bank  of  Montreal  v.  Clark,  272. 
Bank  of  Montreal  v.  Ingerson,  58, 

203. 
Bank   of  Montreal  v.   White,   85, 

211. 
Bank  of  Newberry  v.  Stegall,  273. 
Bank  of  New  Hanover  v.  Kenan, 

197. 
Bank   of   New    Hanover   v.   Wil- 
liams, 227. 
Bank  of  New  York  v.  State  Bank 

of  Ohio,  326. 
Bank  of  North  America  v.  Tam- 

bljTi,  276. 
Bank  of  Orleans  v.  :Merrill,  79. 
Bank    of    Overton   v.    Thompson, 

339,  344. 
Bank  of  Peru  v.  Fransworth,  78. 
Bank  of  Republic  v.  Baxter,  133. 
Bank  of  Rochester  v.  Jones,  253. 
Bank  of  Rocky  Mount  v,  Floyd, 

196. 
Bank  of  Saginaw  v.  Title  &  Trust 
Co.   of   Western   Pennsylvania, 
79. 


Bank  of  St.  Albans  v.  Farmers'  & 

Mechanics'   Bank,  161. 
Bank  of  St.  Mary's  v.  Calder,  298. 
Bank  of  St.  Mary's  v.   St  John, 

305. 
Bank  of  Sherman  v.  Weiss,  221. 
Bank  of  Sonoma  County  v.  Fair- 
banks, 5. 
Bank   of   Spartanburg  v.   Mahon, 

65. 
Bank  of  State  v.  Hull,  149. 
Bank  of  State  v.  Wheeler,  326. 
I;ank  of  State  of  North  Carolina 

V.   Ford.   237. 
Bank  of  Taylorsville  v.  Hardesty, 

72. 
Bank  of  Tennessee  v.  Burke,  272. 
Bank   of  United   States  v.   Bank 

of  Georgia.  259. 
Bank  of  United  States  v.  Davis, 

Bank  of  United  States  v.  Dunn, 

323,  324. 
Bank  of  United  States  v.  Macales- 

ter,  68,  85. 
Bank  of  United  States  v.  Owens, 

.-,07    900 

Bank   of   United   States  v.  Wag- 

gener,  237. 
Bank  of  United  States  v.  Wash- 
ington, 84. 
Bank  of  Utica  v.  Magher,  262. 
Bank    of    Vergennes    v.    Warren, 

319. 
Bank  of  Washington  v.  Triplett, 

194. 
Bank  of  Williamson  v.  McDowell 

County  Bank,  162. 
Banks  v.  Poitiaux,  280. 
Barbour  v.  Bayon,  120. 
Barned's  Banking  Co.,  In  re,  21, 

2?. 
Barnes  v.  Ontario  Bank,  283,  322. 
I'.arnet  v.  Muncie  Nat.  Bank,  244. 
Earnet  v.  Smith,  138. 
Barrett  v.  Bloomfield  Sav.  Inst., 

443,  444. 


CASES   CITED 
[The  figures  refer  to  pages] 


585 


Barrick  v.  Austin,  324. 
Barron  v.  McKinuon,  284,  421. 
Bartlett  Estate  Co.  v.  Fraser,  316. 
Bartley  v.  State,  149. 
Barwick   v.   English  Joint   Stock 

Bank,  331. 
Batchelder  v.  Central  Nat.  Bank, 

46. 
Batchelor  v.  Planters'  Nat.  Bank 

of  Louisville,  298,  300. 
Batchelor  v.  U.  S.,  407. 
Bates  V.  Bank  of  State.  276. 
Bates  V.  First  Nat.  Bank,  47. 
Bates  V.  People's  Savings  &  Loan 

Ass'n,  268. 
Bates  V.  State  Bank,  227. 
Bath  Savings  Inst.  v.  Fogg,  460. 
Battey  v.  Eureka  Bank,  249. 
Baxter  v.  Coughlin,  305. 
Bayard  v.  Shuuk,  259. 
Bayor  v.  American  Trust  &  Sav- 
ings Bank,  23,  349. 
Bavins  v.  London  &  S.  W.  Bank, 

105. 
Beal  v.  National  Exch.  Bank  of 

Dallas.   209. 
Beal  V.  Somerville,  32,  36,  38. 
Beard    v.    Independent    Dist.    of 

Pella  City,  358. 
Beardsley  v.  Webber,  80. 
Beaumont,  In  re,  154. 
Beauregard  v.  Knowlton,  117,  147. 
Beaver  v.  Beaver,  457. 
Beck  V.  McGillis,  55. 
Becker  v.  Seymour,  73. 
Becker's    Investment    Agency    v. 

Rea,  231. 
Beckham  v.  Shackelford,  425. 
Becl-cwith  v.  Webber.  77. 
Bedell  v.  Harbine  Bank  of  Fair- 

hury.  219. 
Bedford  Bank  v.  Acoam,  58,  62. 
Bell  V.  Alexander,  108. 
Bellemire     v.     Bank     of     United 

States,  198. 
Bellows    Falls    Bank    v.    Rutland 

County  Bank,  81. 


Bennet  v.  Union  Bank,  250. 

Benson  v.  Keller.  40. 

Benton  v.  German-American  Nat. 

Bank,  340.  "^ 

Bornheimer  v.  Marshall,  164. 
Bernstein  v.  Coburn,  73. 
Bickford  v.  First  Nat.  Bank,  110, 

132,  137. 
Bickley  v.  Commercial  Bank,  24, 

317. 
Biebinger    v.    Continental-  Bank, 

211. 
Bill  v.  Stewart,  120,  125. 
Billings  V.  Devaux,  155. 
Billingsley  v.  Pollock,  203,  206. 
Bingham,  In  re,  388. 
Binghampton  Trust  Co.  v.  Auten, 

329. 
Birch  V.  Fisher,  80. 
Bircher  v.  Walther,  359. 
Bird    V.    Louisiana    State    Bank, 

196. 
Birmingham  Nat.  Bank  v.  Brad- 
ley, 122. 
Birmingham  Nat.  Bank  v.  Mayer, 

65. 
Birmingham  Trust  &  Sav.  Co.  v. 

Louisiana  Nat.  Bank,  336. 
Bishop  v.  Mahoney,  356. 
Bissell  V.  First  Nat.  Bank,  319. 
Black  V.  First  Nat.  Bank,  2.34. 
Elackmore  v.  Woodward,  388. 
Blaffer  v.   Louisiana   Nat.   Bank, 

178,  182. 
Blaine  v.  Bourne,  221. 
Blair  v.  Fir.st  Nat.  Bank,  322. 
Blair  v.  Hill,  356. 
Blair  v.  Wilson,  97. 
Blaisdell  &  Co,  v.   White  &  Co., 

255. 
Blake    v.    Hamilton    Dime    Sav. 

Bank  Co.,  134,  138. 
Blake  v.  State  Sav.  Bank,  359. 
Blaker  v.  Hood,  8. 
Blakeslee  v.  Hewitt,  191. 
P>1  an  chard    v.   Commercial   Bank, 

313. 


586 


CASES   CITED 
[The  figures  refer  to  pages] 


Bletz  V.  Cohunbia  Nat.  Bauk,  245. 

Bloomer  v.  'Dau,  191. 

Bloom    V.   Wiiithrop    State   Bank, 

129. 
Board  of  Chosen  Freeholders  of 

County    of    Essex    v.    Newark 

City  Nat.  Bank.  45,  50. 
Board  of  Fire  &  Water  Com'rs  of 

City  of  Marquette  v.  Wilkinson, 

44.  356,  358. 
Bobb  V.  Savings  Bank.  61,  288. 
Bobbett  V.  Pinkett,  173. 
Bobo  V.  People's  Nat.  Bank.  243, 

244. 
Eoettcber  v.  Colorado  Nat.  Bank, 

69,  128. 
Boles  V.  Harding,  103. 
Bolin,  In  re,  459.  460. 
Bond  V.  Central  Bank  of  Georgia, 

227. 
Bonnet  v.  First  Nat.  Bank.  412. 
Boone  v.   Citizens'  Sav.  Bank  of 

New  Tork  City.  47. 
Boone  County  Nat.  Bank  v.  Lat- 
imer, 208.  356. 
Booth  V.  Atlanta  Clearing  House 

Ass'n,  188,  349. 
Booth    V.    Bristol    County    Sav. 

Bank,  457. 
Boothe    V.    Farmers'    &    Traders' 

Nat.  Bank,  71. 
Born  V.  First  Nat.  Bank.  137. 
Borough    Bank    of    Brooklyn    v. 

Mulqueen.  74. 
Borup  V.  Nininger,  196.  200. 
Bowden  v.  Farmers'  &  Merchants' 

Bank  of  Baltimore.  385. 
Bowden  v.  .Johnson.  390.  .391.  393. 
Bowen  v.  Needles  Nat.  Bank,  96, 

99.  108.  284,  280. 
Bowen  v.  Newell,  97.  100,  102. 
Bowling  V.  Arthur,  198. 
Bowman  v.  Cecil  'Bank.  272,  273. 
Bowman  v.  First  Nat.  Bank,'  206, 

207. 
Boyd  V.  Satterwhite.  .56. 
Boyd  V.  Schneider.  402. 


Boyd's  Ex'r  v.  First  Nat.  Bank, 
61,  313. 

Boyer  v.  Boyer,  439. 

Boykin  v.  Bank  of  Fayetteville, 
218. 

Boylston  Nat.  Bank  v.  Richard- 
son, 1.50,  183. 

Brabrook  v.  Boston  Five  Gents 
Sav.  Bank,  455,  4.56. 

Braden's  Estate,  364. 

Bradlee  v.  Warren  Five  Cents 
Sav.  Ban!v.  446. 

Bradley  v.  Chesebrough,  359. 

Bradley  v.  Delaplaine,  100. 

Bradley  v.  Illinois.  435. 

Bradner  v.  Woodruff.  347. 

Brahm  v.  Adkin  .  20,  91. 

Branch  v.  Dawson.  26,  51,  57.  93. 

Branch  Bank  at  Mobile  v.  Stro- 
ther,  238. 

Branch  Bank  of  State  at  Mont- 
gomery V.  Knox,  189. 

Brandao  v.  Barnett,  210. 

Brandt  v.  Public  Bank,  95. 

Bremer  County  Bank  v.  Mores, 
83. 

Brennan  v.  Merchants'  &  Manu- 
facturers' Nat.  Bank,  153,  154. 

Bridenbecker  v.  Lowell,  322. 

Briggs  V.  Spaulding,  301,  302,  304, 
397. 

Brighton  v.  White,  347. 

Brinckerhoff  v.  Bostwick.  401.  430. 

Briscoe  v.  Bank  of  Kentucky, 
261.  262. 

British  &  American  Mortg.  Co.  v. 
Tibballs,  203. 

Brittan  v.  Oakland  Bank  of  Sav- 
ings, 227,  445. 

Britton  v.  Niccolls,  199. 

Brixen  v.  Deseret  Nat.  Bank.  90. 

Broderick  v.  Waltham  Sav.  Bank. 
52. 

Bromley  v.  -  Commercial  Nat. 
Bank,   147. 

Brooke  v.  Tradesmen's  Nat.  Bank, 
146. 


CASES   CITKD 
[The  figures  refer  to  pages] 


587 


McElroy,  SO. 

Marion  Nat.  Bank,  242, 


Brooklyn  Trust  Co.  v.  Toler,  133. 
Brothers   v.    Bank   of   Kaukauua, 

335. 
Brown,    In   re,   98,  100,   102.   lOS, 

147. 
Brown  v.    I'.radford,   280,   309. 
Brown    v.    Butchers'    &    Drovers' 

Bank,  10(i. 
Brown  v.  Daugherty,  47. 
Brown  v,  Ellis,  387. 
I'.rowu  V.  Farmers'  &  ^lerchants' 

Nat.  Bank,  298. 
Brown  v.  Ilogg,  276. 
Brown  v.  Kinsley  Exch.  Bank,  50. 
Brown  v.  Leckie,  137. 
Brown  v.  Lusk,  100. 
Brown  v.  Lynchburg  Nat.   Bank. 

88. 
Brown  v. 
lirown  V. 

243. 
Brown  v.    Merrimack   River    Sav. 

Bank,  453. 
Brown  v.  New  Bedford  Inst,  for 

Sav.,  211. 
Brown  v.  People's  Bank  for  Sav- 
ings of  St.  Augustine,  215,  217. 
Brown  v.  Reed.  169. 
Brown  v.  Schintz,  108,  123. 
Brown  v.  Schleier,  281,  282.  284. 
Brown   v.   Second   Nat.   Bank   of 

Erie,  242. 
Brown  v.  Sheldon  State  Bank,  44, 

353. 
Brown  v.  Tillinghast,  372. 
BroAA-n's    Estate,    In    re,    76. 
Bruen  v.  Hone,  26. 
Brummagim  v.  Tallant,  80. 
Bruner  v.  Citizens'  Bank  of  Shel- 

byville,  270.  272. 
Bruner  v.   First  Nat.   Bank,  209, 

351. 
Brusegaard  v.  Ueland.  34. 
Brust   V.   Barrett,   118,   119. 
Bryan  v.  First  Nat.  Bank,  39. 
Bryant    v.    Damariscotta    Bank. 
262. 


Buchanan  v.  Drovers'  Nat.   Bank 

of  Chicago,  2.39. 
Buckingham,   Apiieal   of.   4.56. 
Buckley    v.    Seco»^  Nat.    Bank, 

173. 
Buffalo     County     Nat.     Bank     v. 

Sharpe,  339. 
Bull  V.  First  Nat.   Bank,  78,  99, 

105,  108,  127. 
Bui  lard  v.  P.ell,  260. 
Bulla rd  v.  National  Eagle  Bank, 

250,  378. 
Bullard  v.   Randall,  97. 
lUillot  V.   Bank  of  Pennsylvania, 

264. 
Bundy  v.  Cocke,  384. 
lUuidy  V.  Monticello.  68. 
Bunnell    v.     Collinsville    Savings 

Soc,  449. 
Burnham  v.  Barth,  358. 
Burns  v.  Burns,  461. 
Burns  v.  Kahn,  102. 
Burns  v.   Yotum,   110. 
Burrell  v.   Bennett,   349. 
Burridge  v.  Geauga  Bank,  264. 
Burrill  v.  Dollar  Sav.  Bank,  451. 
Burrill  V.  President,  etc.,  of  Na- 

hant  Bank,  310. 
Burroughs    v.    Tradesmen's    Nat. 

Bank,  145. 
Burrows   v.   Western    T^nion   Tel. 

Co.,  175. 
Burtnett  v.  First  Nat.  Bank,  70. 
Burton  v.  Burley,  271. 
Burton  v.  U.  S..  35.  37. 
Burwell  v.  Burgwyn.  83. 
Bushuell  V.  Leland,  393,  415. 
Butcher  v.  Butcher,  15,  21,  23. 
Butler  V.  Poole,  393. 
Butler  V.  Western  German  Bank, 

356. 
Buzzell  V.  Tobin,  125. 


Cadiz  Bank  v.  Slemmons,  245. 
I  Cadle  V.  Baker,  418. 


588 


CASES   CITED 
[The  figures  refer  to  pages] 


Cady  V.  South  Omaha  Nat.  Bank, 

70. 
Cake  V,  PottsviUe  Bank,  313. 
Caldwell's  P:state,  In  re,  55. 
California  Nat.  Bank  v.  Kennedy, 

249,  277,  278,  291,  295. 
California  Nat.  Bank  of  San  Di- 
ego V.  Gintry,  241. 
Callabam   v.   Bank   v.   Anderson, 

63.  146. 
Camden  Nat.  Bank  v.  Green,  70. 
Cameron  v.   First   Nat.    Bank   of 

Decatur,  288. 
Camidge  v.  Allenby,  2.59. 
Camp  V.  First  Nat.  Bank,  72. 
Camp    V.    Southern    Banking    & 

Tru.st  Co.,  335. 
Campbell  v.  First  Nat.  Bank,  335. 
Campbell  v.  Manufacturers'  Nat. 

Bank,  326. 
Campbell    v.     Mississippi     Union 

Bank,  257. 
Campbell   v. 

Bank,  320. 
Campbell     v 

Bank,  453. 
Campbell  v.  Watson,  305,  306. 
Canadian  Bank  of  Commerce  v. 

Bingham,  164. 
Canadian  Bank  of  Commerce  v. 
I      Coumbe,  334. 
Oanal  Bank  v.  Bank  of  Albany, 

173. 
Candee  v.  Connecticut  Sav.  Bank, 

459. 
Canfield  v.    State  Nat.    Bank   of 

Minneapolis,  249. 
Capital  Bank  v.  Armstrong,  169. 
Capital  Nat.  Bank  v.  First  Nat. 

Bank,  431. 
Capital  Sav.  Bank  &  Trust  Co.  v. 
Montpelier  .Sav.  Bank  &  Trust 

Co.,  125. 
Capital  &  Counties  Bank  v.  Gor- 
don, 40. 
Capitol  State  Bank  v.  Lane,  193. 
Carey  v.  McDougald,  319. 


National    Broadway 
Schenectady     Sav. 


Carolina  Sav.  Bank  v.  Parrott, 
237. 

Carpenter  v.  Northfleld  Bank,  60. 

Oarpy  v.  Dowdell,  320. 

Carr  v.  Fidelity  Bank,  151,  156. 

Carr  v.  National  Bank  of  Loan 
Co.  of  Watertown,  329. 

Carr  v.  National  Security  Bank, 
128. 

Carroll  v.  Cone,  91. 

Carroll  v.  Exchange  Bank,  222, 
223. 

Carson,  Pirie,  Scott  &  Co.  v.  Fin- 
cher,  117. 

Carter  v.  Union  Bank,  200. 

Casco  Nat.  Bank  of  Portland  v. 
Clark,  337. 

Case  V.  Citizens'  Bank  of  Louisi- 
ana, 319,  323,  347,  422,  423. 

Case  V.  Hawkins,  315. 

Case  V.  Hender.son,  128. 

Case  V.  Small,  417. 

Casey  v.  Carver,  84. 

Casey  v.  Galli,  365,  366,  393,  .394. 

Casey  v.  La  Societe  de  Credit  Mo- 
bilier,  417. 

Cassel  V.  Regierer,  115. 

Cassidy  v.  First  Nat.  Bank,  76, 
77. 

Cassidy  v.  Uhlmann,  305. 

Cate  V.  Patterson,  77. 

Catlin  V.  Eagle  Bank  of  New  Ha- 
ven, 347. 

Oavin  v.  Gleason,  358. 

Cecil  Bank  v.  President,  etc..  of 
Farmers'  Bank  of  Maryland, 
221. 

Cecil  Nat.  Bank  v.  Watsontown 
Bank,  323. 

Central  Bank  v.  Empire  Stone 
Dressing  Co.,  285. 

Central  Bank  of  Wisconsin  v.  St. 
John,  237. 

Central  Georgia  Bank  v.  Cleve- 
land Nat.  Bank,  200. 

Central  Mercantile  Co.  v.  Okla- 
homa State  Bank,  254. 


CASES   CITED 
[Tho  figures  refer  to  pages] 


589 


Central  Nat.  Bank  v.  Connecticut 
Mut.  Life  Ins.  Co.,  45,  49,  68, 
412. 
Central  R.  &  Banking  Co,  of 
Georgia  v.  Farmers'  Loan  & 
Trust  Co.,  285. 
Central   Transp.    Co.   v.   Pullman 

Palace  Car  Co.,  292. 
Chadbourne  v.   Stockton   Savings 

&  Loan  Soc,  314. 
Chadwick  v.  U.  S.,  406. 
Chafin  v.  Lincoln  Sav.  Bank,  238. 
Cliambers  v.  Miller,  149,  150. 
Champion  v.  Gordon,  100. 
Chapman  v.  Lynch,  9. 
Chapman  v.  McCrea,  196. 
Charles  v.  Blackwell,  102,  103. 
Chase  v.   Waterbury   Say.   Bank, 

453. 
Chatham  Bank  v.  Allison,  200. 
Chattahoochee      Nat.      Bank      v. 

Schley,  15,  16. 
Chemical     Nat.     Bank    v.     Arm- 
strong, 420. 
Chemical  Nat.  Bank  v.  Hartford 

Deposit  Co.,  416,  419. 
Chemical    Nat.    Bank    v.    Haver- 
male,  278. 
Chemical   Nat.   Bank   v.   Kohner, 

324. 
Chemical  Nat.  Bank  of  Chicago  v. 
World's  Columbian  Exposition, 
419. 
Chemical  Nat.  Bank  of  New  York 

V.  Armstrong,  316. 
Cheney  v.  Libby,  191. 
Cherry    v.    City   Nat.    Bank,   316, 


Cherry  v.  Fidelity  &  Deposit  Co., 

330. 
Chesapeake  Bank  v.  Swain.  60. 
Chester  v.  Halliard,  306,  448. 
Chetwood,     Ex    parte,    401,    415, 

417,  421. 
Chicago  Marine  &  Fire  Ins.   Co. 

V.  Carpenter,  59. 


Chicago  Marine  &  Fire  Ins.  Co.  v. 

Stanford,  15. 
Chicago  Sav.  Bank  jj^^-Block,  166. 
Cliristie  v.  Sherwood,  336. 
Christopher  v.  Norvell,  381,  384. 
Church  v.  Faruham,  118. 
Cincinnati,    H.    &    D.    R.    Co.    v. 

JNIetropolitan  Nat.  Bank,  128. 
Citizens'  Bank  v.  Bank  of  Waddy, 

323. 
Citizens'    Bank    of    Baltimore    v. 

Howell,  198,  216. 
Citizens'  Bank  of  Garnett  v.  Bow- 
en,  62. 
Citizens'    Bank   of    Greenville    v. 

Kretschmar,  353. 
Citizens'    Bank   of   Humphrey    v. 

Fromholz,  93. 
Citizens'  Bank  of  Pleasantville  v. 
"  First  Nat.  Bank,  113. 
Citizens'  Bank  of  Steubenville  v. 

Carson,  59,  72. 
Citizens'    Bank    &    Trust    Co.    v. 

Thornton,  316. 
Citizens'    Central    Nat.    Bank    v. 
New    Amsterdam    Nat.     Bank, 
150,  182,  184. 
Citizens'  Cent.  Nat.  Bank  of  New 

York  V.  Appleton,  286. 
Citizens'  Nat.  Bank  v.  Alexander, 

43,  50,  70. 
Citizens'  Nat.  Bank  v.  Brown,  76, 

78. 
Citizens'   Nat.   Bank  v.   Common- 
wealth of  Kentucky,  437. 
Citizens'    Nat.    Bank    v.    Donnell, 

241,  242. 
Citizens'  Nat.  Bank  v.  Dowd,  352. 
Citizens'     Nat.     Bank     v.     Great 

Western  Elevator  Co.,  365. 
Citizens'  Nat.  Bank  of  Davenport 
V.  Importers'  &  Traders'  Bank 
of  New  York,  143,  172. 
Citizens'  Nat.  Bank  of  Kingman 

V.  Berry,  314. 
Citizens'  Nat.  Bank  of  Lawrence- 
burg  V.  Third  Nat.  Bank,  195. 


390  CASES   CITED 

[The  figures  refer  to  pages] 
Citizens'  Sar.  Bank  v.  Vaughan,"  City  of  SomenUle  v.  Beal.  350 


66. 

Citizens"  Sar.  Bant  v.  TValden. 
336. 

Citizens"  State  Bank  v.  Cowles, 
40.  125.  273. 

City  and  County  of  San  Francisco 
T.  Crocker-Woolwortli  Xat. 
Bank.  436. 

City  Bank  of  Columbus  v.  Beach. 
270. 

City  Bank  of  Columbus  v.  Farm- 
ers' &  Planters"  Bank  of  Bal- 
timore, 260. 

City  Bank  of  Hopkinsville  v. 
Blackmore,  35S. 

City  Bank  of  Houston  v.  First 
Nat.  Bank.  16S. 

City  Bank  of  New  Haven  v.  Per- 
kins. 319,  322. 

City  Deposit  Bank  of  Columbus 
V.  Green.  40. 

City  Xat.  Bank  v.  Chemical  Nat. 
Bank.  322. 

City  Nat.  Bank  of  Hastings  v. 
Thomas,  316. 

City  Nat.  Bank  of  Dayton  v.  Clin- 
ton County  Nat.  Bank  of  Wil- 
mington,  197. 

City  Nat.  Bank  of  Ft.  Worth  v. 
Martin.  .327. 

City  Nat.  Bank  of  Mangum  v. 
Crow,  399. 

City  Nat.  Bank  of  Poughkeepsie 
V.  Phelps.  366. 

City  Nat.  Bank  of  Selma  r. 
Burns,  38.  149. 

City  of  Charleston  v.  People's 
Nat.  Bank,  370. 

City  of  Lincoln  v.  Morrison,  356, 

358,  359. 
City    of    Newburyport   v.    Spear, 
151,  157. 

City  of  New  York  v.  Tenth  Nat. 

Bank.  .338.  342. 
City  of  Philadelphia  v.  Eckels.  36. 
City   of   Pittsburg   v.   First   Nat. 
Bank,  83. 


Claassen  v.  U.  S.,  406. 

Claflin    V.    Farmers'    &    Citizens' 

Bank,  141. 
Claflin  V.  Houseman,  245,  430. 
Clark  V.  Clark.  456. 
Clark  V.  Northampton  Nat.  Bank. 

64,  68. 
Qark  v.  Ogilvie,  3S7. 
Clark  V.  Toronto  Bank.  3-52. 
Clark's    Adm'r    v.    Farmers"    Nat. 

Bank  of  Richmond.  60.  91. 
Clarke  v.  Hawkins.  260. 
Clarke  v.  Ingram,  347. 
Clarke  Nat.  Bank  v.  Bank  of  Al- 
bion. 141. 
Cleary   v.    De   Beck, Plate   Glass 

Co..  103. 
Clement  V.  U.  S.,  367. 
Clemmer  v.   Drovers'  Nat.   Bank. 
,  68. 

Cleveland  v.  Shoeman,  24S. 
Cleveland.  C.  C.  &  St.  L.  Ry.  v. 

Hawkins,  .356. 
Cleveland   Trust    Co.    v.    Lander, 

438. 
Clews  V.  Bank  of  New  York  Nat. 

Banking  Ass"n,  169,  329. 
Clews  V.  Bardon.  301. 
Clinton    Nat.    Bank    v.    National 

Park  Bank  of  New  York,  288. 
Clute  V.  Warner,  74. 
Coats  V.  Donnell.  322. 
Cochecho   Nat.   Bank  v.   Haskell, 

.324.  329. 
Cochran  v.  U.  S.,  285.  409. 
Cockrill  V.  Abeles,  281,  299,  399. 

401.  402. 
Cockrill  V.  Butler,  403. 
Cockrill  V.  Cooper.  402.  403,  404. 
Cockrill  V.  .Joyce.  210. 
Codrington  r:  Ada  me.  197. 
Cody  y.  City  Nat.  Bank.  32.  36. 
Coffey  V.  National  Bank  of  Mis- 
souri. 367. 
Coffin  V.  U.   S.,  408. 
C-ogswell     V.      Rockingham     Ten 

Cents  Sav.  Bank,  108,  445.  4-50. 


CASES   CITED 
[The  figures  refer  to  pages] 


501 


Cogswell    V.    Secoiul    Nat.    Bank, 

3GS,  373,  380,  X-"*- 
Cohen  v.  St.  Louis  Periietual  Ins. 

Co.,  60. 
Cole  V.  Charles  City   Nat.   Bank, 

92. 
Cole  V.  Cole,  357. 
Collins  V.  Johnson.  326. 
Collins  V.  State,  13. 
Colonial     Bank    of    Australia    v. 

Marshall,  170. 
Oolt  V.  Brown,  353. 
Colton     V,      Drovers'      Perpetual 

BuiUliiifs  &  Loan  Ass'n,  74. 
Columbia  Finance  &  Trust  Co.  v. 

First  Nat.  Bank,  156. 
Columbia     Nat.     Bank     v,     Mac- 
Knight.  146. 
Columbia    Nat.    Bank   of    Lincoln 

V.  German  Nat.  Bank,  129. 
Columbia  Nat.  Bank  of  Tacoma  v. 

Mathews,  372. 
Columbian  Banking  Co.  v.  Bowen, 

123,  124. 
Comer  v.  Dufour,  122,  202. 
Commercial   Bank  v.    Red   River 

Val.  Nat.  Bank,  215,  218. 
Oommereial     Bank    v.     Sherman, 

273. 
Commercial    Bank    of    Albany    v. 

Hughes,    62. 
Commercial  Bank  of  Bay  City  v. 

Chataelcl,  299,  300. 
Commercial  Bank  of  Danville  v. 

Burgwyn,   342. 
Commercial    Bank  of   Keokuk   v. 

rfeiffer,  2.53. 
Commercial  Bank  of  Manchester 

V.  Nolan,  247,  276. 
Commercial  Bank  of  Manitoba  v. 
Chicago,  St.  P.  &  K.  C.  R.  Co., 
203. 
Commercial    Bank   of   Pennsylva- 
nia   V.    Union    Bank    of    New 
York,  217. 
Commercial   Bank  of  Tacoma   v. 
Chilberg,  128!  « 


Conunercial    Nat.    Bank    v.    Arm- 
strong, 30,  33,  205,  206,  209.  220, 
221,  222. 
Conunercial  Nat.  Bank  v.  Cham- 
bers, 440. 
Connnercial  Nat.  Bank  v.  Ilennin- 

ger,  72. 
Commercial    Nat.    Bank   v.    Pirie, 

284. 
Conunercial  Nat.  Bank  v.  Proctor, 

65. 
Conunercial   Nat.    Bank  v.   Wein- 

hard,  374. 
Conunercial   Nat.    Bank  of  Char- 
lotte V.    First   Nat.   Bank,   118, 
128. 
Conmiercial  &  Agricultural  Bank 

V.  Jones,  48. 
Commercial      &     Farmers'      Nat. 
Bank  of  Baltimore  v.  First  Nat. 
Bank,  134,  181. 
Com.  V.  Bank  of  Mutual  Redemp- 
tion, 283. 
Com.   V.   Kentucky  Distilleries  & 

Warehouse  Co.,  129. 
Com.  V.  Ray,  106. 
Com.  V.  Reading  Sav.  Bank,  447. 
Compton  V.  Oilman,  116,  118. 
Conory  v.  Warren,  117. 
Consolidated   Nat.   Bank  of  New 
York    V.    First    Nat.    Bank,    38, 
148. 
Constant  v.  University  of  Roches- 
ter, 338. 
Continental  Nat.  Bank  v.  Buford, 

431. 
Continental   Nat.    Bank   v.    Eliot 

Nat.    Bank,   376. 
Continental    Nat.    Bank    v.    First 

Nat.  Bank,  222. 
Continental  Nat.  Bttnk  v.  Metro- 
politan Nat.  Bank,  1.35,  167. 
Continental  Nat.  Bank  v.  Nation- 
al P>ank  of  Commonwealth.  141. 
■Continental  Nat.  Bank  v.  Weems, 
207,  208,  211,  356. 


592 


CASES   CITED 
[The  figures  refer  to  pages] 


Continental    Nat.    Bank    of    New- 
York  y.  Tradesmen's  Nat.  Bank, 

169. 
Continental    Nat.    Bank    of    New 

York  V.  Tradesmen's  Nat  Bank 

of  New  York,  135. 
Conway  v.   Halsey,  401. 
Cook  V.  American  Tubing  &  Web- 
bing Co.,  344. 
Cook  County  Nat.  Bank  v.  U.  S., 

414,  419. 
Cooke  V.    State   Nat.   Bank,   141, 

321. 
Cooke  V.  U.  S.,  260. 
Cooley  V.  Weeks.  258. 
Cooper  V.  Hill,  281.  298,  299,  403. 
Cooper  V.  Townsend,  61. 
Coote  V.  Bank  of  United  States, 

70. 
Cope  V.  Westbay,  298. 
Corbit  V.  President,  etc.,  of  Bank 

of  Smyrna,  59. 
Corcoran  v.  Snow  Cattle  Co.,  342, 

344. 
Corn    Exch.    Bank    v.    Farmers' 

Nat.    Bank   of    Lancaster,   Pa., 

218. 
Corn  Exch.  Bank  v.  Nassau  Bank, 

172. 
Corn  Exch.   Bank  of  Chicago  v. 

Blye,    416,    427. 
Corn  Exch.  Nat.  Bank  v.  Locher, 

66. 
Corn  Exch.  Nat.  Bank  v.  National 

Bank  of  Republic,  181. 
Corser  v.  Paul,  322. 
Cosgrove   v.   Provident   Inst,   for 

Savings,  451,  452. 
Cottle   V.    Marine   Bank   of   Buf- 
falo, 80. 
Covington    v.    First    Nat.    Bank, 

437,  438. 
Cowing  V.  Altman,  108. 
Cox  V.  Bank  of  Hartsville,  84. 
Cox  V.  Boone,  110. 
Cox  V.  Montague,  .390. 
Cox  V.  Robinson,  315,  316. 


Cragie  v.  Hadley,  23,  36,  337,  350, 

352. 
Craig  V.  Missouri,  261. 
Crane  v.  Cameron,  211. 
Crane  v.  Fourth  St.   Nat.  Bank, 

179.  185. 
Crawford  v.  Bank  of  Wilmington, 

262. 
Crawford  v.  West  Side  Bank,  101, 

167. 
Creed  v.  Commercial  Bank  of  Cin- 
cinnati, 236. 
Creveliug     v.     Bloomsbury     Nat. 

Bank,  128. 
Critten   v.   Chemical   Nat.   Bank, 

87,  88,  89,  166.  171. 
Crocker  v.  Whitney,  250. 
Crocker-Woolworth  Nat.  Bank  v. 

Nevada    Bank,    168,    173,    180, 

184. 
Cross  V.  North  Carolina,  363. 
Crosse  v.  Rowe,  309. 
Crouse    v.    First    Nat.    Bank    of 

Penn  Yan,  194. 
Crow   V.    Mechanics'    &   Traders' 

Bank,  193. 
Crystal  Plate  Glass  Co.  v.  First 

Nat.  Bank,  321. 
Cullinan  v.  Union  Surety  &  Guar- 
anty Co.,  138. 
Culter  V.  Reynolds,  100. 
Culver  V.  Marks,  117. 
Cuminsky  v.  Kleiner,  123. 
Cummings     v.     Merchants'     Nat. 

Bank,  439. 
Cummings  v.  Spauiihorst,  9. 
Cunningham  v.   Bank  of  Nampa, 

48. 
Cunningham  v.  First  Nat.  Bank, 

87. 
Cunningham  v.  Pell,  306. 
Currau  v.  Arkansas,  262. 
Curran  v.  Witter,  80. 
Currey  v.  Joplin  Sav.  Bank,  77.    ■ 
Curtice  v.  Crawford  County  Bank, 

334.  336. 
Curtjs  V.  Leavitt,  283. 


CASES   CITED 
[The  figures  refer  to  pages] 


593 


Gushing  v.  Gore,  100. 

Cutler    V.    America n    Excli,    Nat. 

Bank,  56. 
Cutts  V.  Perkins,  155. 

D 

Dabney  v.  Bank  of  State,  59,  285. 
Daggs  V.  Phoenix  Nat.  Bank,  241. 
Daly    V.     Butchers'     &    Drovers' 

Bank,  216. 
Dana  v.  Bank  of  United  States, 

310. 
Dana    v.   National   Bank   of   Re- 
public, 88,  89. 
Dana  v.  Third  Nat.  Bank  in  Bos- 
ton,  147. 
Danforth  v.  National  State  Bank 
of  Elizabeth,  230,  231,  233,  242, 
243,  245. 
Darby  v.  Berney  Nat.  Bank,  326. 
Darrington  v.  Bank  of  Alabama, 

262. 
Davega  v.  Moore,  103,  104. 
Davenport   v.    National    Bank  of 

Commerce,  186. 
Davenport  v.  Prentice,  300. 
Davenport  v.  Stone,  234,  321,  322. 
Davenport  Nat.  Bank  v.  Board  of 

Equalization,  438,  439,  441. 
Davenport  Plow  Co.  y.  Lamp,  359. 
Davey  v.  Jones,  199. 
Benton,  112. 
Dayton,  126. 
Elmira  Sav.  Bank,  362 


Davis  V. 
Davis  V. 
Davis  V. 

422. 
Davis  V. 

Essex, 
Davis  V. 

353. 
Davis  V.  Knipp,  425. 
Davis    V.    Lenawee    County 

Bank,  26,  51. 
Davis  V.  McAlpine,  8. 
Davis   V.   Panhandle   Nat.   Bank 

43,  70. 
Davis  V,  Randall,  239. 
Tiff.Bks.&  B.— 38 


First  Baptist  Society  of 

387. 

Industrial  Mfg.  Co.,  74, 


Sav. 


DavLs  V.  Smith,  14. 

Davis    V.    Standard    Nat.    Bank, 

144,  146. 
Davis  V.  Stevens,  -gSl. 
Davis   V.   Weed,  387. 
Dawson  v.  Real  Estate  Bank,  23, 

C2,  71,  72. 
Deaderick  v.  Bank  of  Commerce, 

:j0(;. 

Dearborn    v.    Northwestern    Sav. 

Bank,  5,  268. 
Dearborn  v.  Union  Nat.  Bank  of 

Brunswick,  20. 
Dearborn     v.     Washington     Sav. 

Bank,  23. 
De  Baun  v.  Smith,  438. 
Dedham    Nat.    Bank    v.    Everett 

Nat.  Bank,  161,  163,  165,  181. 
Dehoust  V.  Lewis,  112. 
Delahunty  v.  Central  Nat.  Bank, 

64,  91. 
De  Land  v.  Dixon  Nat.  Bank,  94. 
Delano  v.   Butler,   370,   371,  373, 

394. 
Delano  v.  Case,  305. 
De      La      Vergne     Refrigerating 

Mach.  Co.  V.  German  Sav.  Inst., 

291. 
Deloach  v.  Jones,  247. 
Demarest  v.  Holdeman,  25. 
Demmon    v.    President,    etc.,    ol 

Boylston  Bank,  65. 
Den  ex  dem.  State  v.  Helmes,  8. 
Denton  v.  Baker,  419. 
Deposit  Bank  of  Carlisle  v.  Flem- 
ing, 283. 
Deposit  Bank  of  Owensborough  v. 

Barrett,  277. 
Deri  v.  Union  Bank  of  Brooklyn, 

47. 
Dern  v.  Kellogg,  201. 
Des    Moines    Cotton    Mill    Co.   v. 

Cooper,  53. 
Detroit  Sav.  Bank  v.  Haines.  95. 
Detroit   Sav.   Bank  v.   Truesdail, 

227. 
Deweese  v.  Smith,  394. 


594 


CASES   CITED 
[The  figures  refer  to  pages] 


Bauk    V. 


Bank, 


De    Witt    County    Nat 
Mickelberry.  282. 

Dickerson  v.  Wasou,  223. 

Dickeschied    v.    Excliange    Bank, 
51. 

Dickey  v.  AcUer,  76. 

Dickinson  v.   Central  Nat 
377. 

Dickinson  v.  Coates,  128. 

Dickinson  v.  Marsli,   140. 

Dickson  v.  Kittson,  443,  444. 

Dille  V.  Wtiite,  105. 

Distilled  Spirits,  335,  .338. 

District  Tp.  of  Eureka  v.  Farm- 
ers' Bank  of  Fontanelle,  359. 

Ditch  V.  Western  Nat.  Bank,  32. 

Ditty  V.  Dominion  Nat.  Bank,  343. 

Dodd  V.   Una,  444. 

Dodd  V.  Wilkinson,  447. 

Dodge  V.  Mastin,  346. 

Dodge   V.    National    Exch.    Bank, 
138. 

Dollar   V.    International    Banking 
Corp.,  76. 

DoUey  v.   Abilene   Nat,   Bank  of 
Abilene,   Kan.,  363. 

Dolph  V.  Rice,  118. 

Donlan    v.     Provident    Inst,    for 
Savings,  452. 

Donnell    v.    Lewis    County    Sav. 
Bank,  283,  322. 

Doppelt  v.  National  Bank  of  Re- 
public, 32. 

Doty  V.  First  Nat.  Bank,  364,  377. 

Dougherty  v.  Moore,  459,  460. 

Dougherty  v.  Vanderpool,  25. 

Iiougherty    v.    Western    Bank    of 
Georgia,  262,  263. 

Douglas  V.  First.   Nat.   Bank,  70. 

Dow  V.  Irasburgh   Nat.   Bank  of 
Orleans,  245. 

Dowie  V.  Humphrey,  358. 

Dowling  V.  Hunt,  118. 

Downes  v.  Pha-nix  Bank,  91. 

Dows    V.    National    Exch.    Bank, 
252. 

Draper  v.  Blackwell,  279. 


Dreilling  v.  First  Nat.  Bank.  40. 

Dresser  v.  Traders'  Nat.  Bank, 
•287. 

Drexel  v.  Pease,  253. 

Driesbach  v.  Second  Nat.  Bank, 
244. 

Drinkall  v.  Movius  State  Bank, 
151,  153. 

Drovers'  Nat.  Bank  v.  Anglo- 
American  Packing  &  Prov.  Co., 
196. 

Drovers'  Nat.  Bank  v.  O'Hare,  20. 

Drum  v.  Benton,  153. 

Drumm-Flato  Commission  Co.  v. 
Gerlack,  50. 

Duc-kett  V.  National  Mechanics' 
Bank,  45,  46,  47. 

Duncan  v.   Berlin,  1.39. 

Duncan  v.  Brenuan,  211. 

Duncan  v.  First  Nat.  Bank,  244. 

Dunn  V.  Houghton,  461. 

Dunn  V.  O'Connor,  228,  250. 

Dunn  V.  Whalen,  138. 

Dvmn's  Adm'r  v.  Kyle's  Ex'r,  447. 

Dupee  V.  Swigert,  268. 

Durkee  v.  City  Bank  of  Kenosha, 
236. 

Durkee  v.  National  Bank  of  Flor- 
ida. 62. 

Dutcher  v.  Importers'  &  Traders' 
Nat.  Bank,  .347. 

Dyer  v.  Sebrell,  353. 

Dykers  v.  Leather  Mfg.'s  Bank, 
101. 


E 

Citizens' 


State    Bank; 


Eakin 
139. 

Earle,  In  re,  417. 

Earle  v.  American  Sugar  Refining 
Co.,  4. 

Earle  v.  Carson,  389,  .390,  391. 

Earle  v.  Coyle,  389. 

Earle  v.   Pennsylvania,   424,  427. 

Eastern  Bank  v.  Capron,  260. 

Eastern  Townships  Bank  v.  Ver- 
mont Nat.  Bank,  313. 


CASES   CITED 
[The  figures  refer  to  pages] 


595 


East.  Haddam  Bank  v.  Scovil,  215. 

p:astin  V.  Third  Nat.  Bank,  230. 

East  man  v.  Com..  257. 

Easton  v.  Iowa,  3G3. 

East  Kiver  Bank  v.  Iloyt,  330. 

Ea.st  River  Nat.  Bank  v.  Gove,  25, 

828. 
Ecker  v.  First  Nat.  Bank,  324. 
Edmisten    v.    Henry    Herpolshei- 

mer  Co..  112. 
Egbert  v.  Payne,  95. 
Egerton  v.  Fulton  Nat.  Bank,  58. 
Elder  v.  Franklin  Nat.  Bank,  153. 
Elffrn   City   Banking  Co.   v.  Hall, 

40. 
Elia.^i  V.  Whitney.  168.      • 
Elizalde  v.  Elizalde,  357. 
Ellard,  In  re,  77. 
Ellery  v.  People's  Bank,  173. 
Ellicott  V.  Kuhl.  357. 
Elliot  V.  Abbot.  322. 
Elliott    T.     Capital     City     State 

Bank,  15,  56,  80. 
Elliott  V.  Farmers'  Bank,  301. 
Elliott  V.  Worcester  Trust  Co.,  59. 
Ellis  V.  Bank,  199,  200. 
Ellis  V.  First  Nat.  Bank,  57,  65, 

32G. 
Ellis  V.  Little.  417. 
Ellis   V.    Ohio  Life   Ins.   &   Trust 

Co.,  162. 
Ellis  V.  Western  Nat.  Bank.  157. 
El  Paso  Nat.  Bank  v.  Fuchs,  18. 
Elwood  V.  First  Nat.  Bank.  415. 
Emerado    Farmers'    Elevator    Co. 

V.  Farmers'  Bank  of  Emerado, 

46. 
Emer.son  v.  Gaither,  399. 
Emery  v.  Ilobson,  IIC,   117. 
Emery  v.  Irving  Nat.  Bank,  254. 
Emmerling    v.    First    Nat.    Bank, 

293. 
Emporia   Nat.   Bank  v.   Shotwell, 

175. 
Endres  v.  First  Nat.  Bank,  245. 
Engle  v.  O'Malley,  S. 
English-American    Loan    &    Trust 

Co.  V.  Hiers,  340. 


Equitable  Bank  v.  Claa.ssen,  73. 

Erwin  v.  Lowry,  239. 

Espy  V.    First    NatBank,    132, 

135,  138. 
Essex  County  Nat.  P.ank  v.  Bank 

of  Montreal,  1.30.  202. 
Estes  V.  Ix)vering  Shoe  Co.,  126. 
E.  Swindell  &  Co.  v.  Bainliridge 

State  Bank,  314. 
Evans  v.  U.  S.,  408. 
Evausville  Nat.  Bank  v.  Britton, 

439. 
Eversole  v.  First  Nat.  Bank,  458. 
Ewing  V.  Toledo  Sav.  Bank,  238. 
Exchange    Bank   of   Columbus   v. 

Hines,  8. 

Exchange    Bank    of    Eldorado    v. 

Gulick,  53. 
Exchange    Bank    of    Wheeling   v. 

Sutton  Bank,  97,  115,  196. 
Exchange  Nat.  Bank  v.  Bank  of 

Little  Rock^  170. 
Exchange    Nat.    Bank    v.    Third 

Nat.   Bank,    193.    194,   195,   196, 

199.  215,  216,  217. 
Eyerman    v.    Second-  Nat.    Bank, 

47,  48. 
Eyre  v.  Walker,  102. 
Eyrich  v.  Capital  State  Bank,  70. 


Fallens  v.  Mercantile  Bank,   197. 
Fairfield  v.  Adams,  .326. 
Fairfield  Savings  Bank  v.  Chase,> 

335.     ' 
Fall  River  Union   Bank   v.   Stur- 

tevant,  336. 
Fanset  v.  Garden  City  State  Bank, 

34.  216.  219. 
Fargason    v.    Oxford    Mercantile 

Co.,  227. 
Farley  v.  Turner,  21,  22,  23. 
Farley  Nat.  Bank  v.  Pollock,  196. 
Farmer  v.  People's  Bank.  173. 
Farmers'  Bank  v.  Burchard.  238. 
1  Farmers'  Bank  v.  Garten,  237,  272. 


59G 


CASES  CITED 
[The  figures  refer  to  pages] 


Farmers'  Bank  of  Fayetteville  v. 

Hale,  239. 
Farmers'    Bank    of    Kentucky    v. 

Calk,  272. 
Farmers'    Bank    of    Nashville    v. 

Johnson,   King  &  Co.,   96,   104, 

147. 
Farmers'    Bank   &   Trust   Co.   of 

Stanford  v,  Newland,  113,  207. 
Farmers'    Deposit    Nat.    Bank    v. 

Penn  Bank,  353. 
Farmers'    Loan    &    Trust    Oo.    v. 

Fidelity  Trust  Co.,  48. 
I'armers'     &     Citizens'     Bank    v. 

Payne,  837. 
Farmers'  &  Mechanics'  Bank,  Ap- 
peal of,  65. 
Farmers'    &   Mechanics'    Bank   v. 

Baldwin,  2,  3,  231. 
Farmers'   &   Mechanics'   Bank   v. 

Butchers'  &  Drovers'  Bank,  132, 

134,  141,  321,  328. 
Farmers'   &  Mechanics'    Bank   v. 

Champlain  Transp.  Co.,  279. 
Farmers'   &   Mechanics'   Bank   v. 

Clancy,  824. 
Farmers'   &   Mechanics'   Bank   v. 

Hoagland,  242. 
Farmers'   &   Mechanics'   Bank   v. 

Parker,  284,  237. 
Farmers'   &   Mechanics'   Bank   v. 

Troy  City  Bank,  320. 
Farmers'   &   Mechanics'   Bank   of 

East  Birmingham  v.  Third  Nat. 

Bank,  185. 
Farmers'   &  Mechanics'   Bank   of 

Georgetown   v.   Planters'   Bank 

of  Prince  George's  County,  91. 
Farmers'   &   Mechanics'   Bank  of 

Kent    County    v.    Butchers'    & 

Drovers'  Bank.  141. 
Farmers'  &  Mechanics'  Nat.  Bank 

V.   Dearing,  239,  240,  242,   361, 

362,  435. 
Farmers'  &  A^echanics'  Nat.  Bank 

V.  King,  22,  53. 
Farmers'      &      Mechanics'      Nat. 

Bank  v.  Ryan,  53. 


Farmers'  &  Merchants'  Bank  v. 
Dunbier,  138. 

Farmers'  &  Merchants'  Bank  v. 
Bank  of  Rutherford,  158,  162, 
164. 

Farmers'  «&;  Merchants'  Nat.  Bank 
V.  Smith,  287,  325. 

Farmers'  &  Jlillers'  Bank  of  Mil- 
waukee V.  Detroit  &  M.  R.  Co., 
276. 

Farmers'  &  Traders'  Bank  v.  Kim- 
ball Milling  Co.,  298. 

Farmington  Sav.  Bank  v.  Fall, 
445. 

Farrar  v.  Gilman,  322. 

larrelly  v.  Emigrant  Industrial 
Sav.  Bank,  460. 

Farry  v.  Farmers'  &  Mechanics' 
Bank,  85,  86. 

Farwell  v.  Curtis,  109,  114. 

Fealey  v.  Bull,  126. 

Fearing,  In  re,  77. 

I'ells  Point  Sav.  Inst,  of  Balti- 
more V.  "Weedon,  76,  81. 

Fernandez  v.  Glynn,  180. 

I'idelity  &  Deposit  Co.  v.  Court- 
ney, 337. 

Fifth  Nat.  Bank  v.  Armstrong, 
218. 

Fifth  Nat.  Bank  v.  Ashworth,  202. 

Fifth  Ward  Sav.  Bank  v.  First 
Nat.  Bank,  445,  446. 

Finch  V.  Gregg,  255. 

Finch  V.  Karste.  200.  201. 

Findley  v.  Cowles,  339. 

Finn  v.  Brown,  383. 

Finnell  v.  Nesbit,  353. 

First  Commercial  Bank  of  Pon- 
tiac  V.  Talbert,  307. 

First  Nat.  Bank  v.  Albright,  435. 

First  Nat.  Bank  v.  Alexander, 
110.  , 

First  Nat.  Bank  v.  Allen,  87,  88, 
89,  160. 

First  Nat.  Bank  v.  American 
Exch.   Nat.  Bank,   175. 

First  Nat.  Bank  v.  American  Nat. 
Bank,  286. 


CASES   CITED 
[The  figures  refer  to  pages] 


597 


I'irst  Nat.  Bank  v.  Anderson,  287, 

325. 
First  Nat.  Bank  v.  Ayers,  440. 
First  Nat.  Bank  v.  Babbidge,  .S40. 
First  Nat.  Bank  v.  Bank  of  Mon- 
roe, 206,  218,  221. 
First  Nat.  Bank  v.  Bank  of  Whit- 
tier.  196. 
First  Nat.  Bank  v.  Bank  of  Wynd- 

mere,  161,  164. 
First  Nat.  Bank  v.  Bannister,  276. 
First  Nat.  Bank  v.  Bayley,  252. 
I'irs't  Nat.   Bank  v.  Bininger,  51. 
First  Nat.  Bank  v.  Blake,  344. 
I'irst  Nat.  Bank  v.  Brager,  68. 
First  Nat.    Bank    v.    Brigg's    As- 
signees. .3.30. 
First  Nat.    Bank    v.    Briggs'    Es- 
tate, 298. 
First  Nat.    Bank   v.   Buckbannon 

Bank,  111. 
First  Nat.  Bank  v.  Burkhardt,  38, 

149. 
I'irst  Nat.  Bank  v.  Butler,  199. 
First  Nat.  Bank  v.  Cbapman,  440, 

441. 
First  Nat.  Bank  v.  Cbehalis  Coun- 
ty. 437,  440. 
First    Nat.    Bank   v.   Cbilds,   242, 

244. 
First  Nat.    Bank    v.    Christopher, 

337. 
First  Nat.  Bank  v.  Citizens'  Bank 

of  Topeka,  16. 
First  Nat.  Bank  v.  Citizens'  Sav. 

Bank.  196. 
First    Nat.    Bank    v.    City    Naf. 

Bank.  84,  163,  173,  196. 
First  Nat.  Bank  v.  Clark,  27,  52, 

53,  76,  128. 
First  Nat.  Bank  v.  Coates,  99. 
First  Nat.  Bank  v.  Colby,  426. 
First  Nat.  Bank  v.  Coleraan.  60. 
First  Nat.  Bank  v.  Converse.  278. 
First  Nat.  Bank  v.  Craig,  217. 
First  Nat.  Bank  v.  Crocker,  252. 
First  Nat.    Bank   v.    Currie,    122, 
123,  137. 


First    Nat.    Bank    v.    Davis,    205, 

206,  208. 
First  Nat.  Bank  v.  Qanson,  244. 
First  Nat.  Bank  v.  Devenish,  149. 
First  Nat.    Bank    v.    Drake,    298, 

312. 
First  Nat.  Bank  v.  Dunbar,  343. 
First  Nat.  Bank  v.  Duncan,  241. 
First  Nat.  Bank  v.  Eastern  Trust 

&  Banking  Co.,  68. 
First  Nat.  Bank  v.  Ege,  253. 
First  Nat.    Bank    v.    First    Nat. 
Bank,    19,    161,    162,    163,    164, 
189,  214,  216,  219,  319. 
First  Nat.  Bank  v.  Foote,  344. 
First  Nat.   Bank  v.   Fourth   Nat. 

Bank,  195,  196,  202,  334. 
First  Nat.  Bahk  v.  Garlinghouse, 

240. 
First  Nat.  Bank  v.  German  Bank 

of  Carroll  County,  198. 
First  Nat.   Bank   v.   Graham,    15, 

16,  17. 
I'irst  Nat.  Bank  v.  Greene,  68. 
First  Nat.  Bank  v.  Gregg,  223. 
I'irst  Nat.   Bank  v.   Gruber,  241, 

244. 
First  Nat.  Bank  v.  Hall,  57,  326. 
First  Nat.    Bank   v.    Harris,    126, 

232. 
First  Nat.  Bank  v.  Hawkins,  279, 

291. 
First  Nat.  Bank  v.  Henry,  15. 
First  Nat.  Bank  v.  Hock,  287. 
First  Nat.  Bank  v.  Hummell,  359. 
First  Nat.  Bank  v.  Joseph  Flem- 
ing &  Son  Co.,  156. 
First  Nat.  Bank  v.  Keith,  153. 
First  Nat.  Bank  v.  Kentucky,  364, 

437,  438. 
First  Nat.  Bank  v.  Kidd.  252. 
First  Nat.  Bank  v.  Kimberlands, 

311,  313. 
First  Nat.  Bank  v.  Lamb,  239. 
First  Nat.    Bank   v.   Lanier,    249, 

250,  377,  378. 
First  Nat.   Bank  v.  Lasater,  243. 


u98 


t  Nat.    Bank    v.    Leach,    132, 
7. 

V.  Linn  County 


Fii 

137. 
First  Nat.   Bank 

Bank.  109. 
First  Nat.  Bank  v.  Lucas,  314. 
First  Nat.     Bank    v.    McConnell, 

110. 
First  Nat.  Bank  v.  McEntire.  240. 
First  Nat.  Bank  v.  Mclnturff,  243. 
First  Nat.    Bank    v.    Marsliall    & 

Ilsley  Bank,  330. 
First  Nat.  ,Bank  v.  Marshalltown 

State  Bank,  161. 
First  Nat.  Bank  v. 

.50. 
First  Nat.  Bank  v. 

Bank,  322. 
First  Nat.    Bank    v, 

122. 
First  Nat 
First  Nat 

4.30. 
First  Nat 

er,  200. 
First  Nat.  Bank  v.  National  Exch. 

Bank,  278. 
First  Nat.  Bank  v.  National  Park 

Bank  of  New  York,  313. 
First  Nat.  Bank  v.  Needham,  126, 


CASES  CITED 
[The  figures  refer  to  pages] 

First  Nat. 
First  Nat. 
First  Nat. 
First  Nat. 


Bank  v. 
Bank  v. 


Mason,  43,  48, 

Michigan  City 

,    Miller,    111, 

Moore,  194. 
Morgan,  429, 


Bank  v.   Munzesbeim- 


V. 


First  Nat.  Bank 
First  Nat.  Bank 
First  Nat.  Bank 

344. 
First  Nat.  Bank 
First  Nat.  Bank 

Nat.  Bank.  134,  136,  174. 
First  Nat.    Bank    v.    Ocean 

Bank,  16. 
First  Nat.  Bank  v. 
Bank  v. 
276. 

Bank  v. 
Bank  v. 

Bank  v.  Bersall,  335 
Bank  v. 


First 'Nat. 
tor  Co., 
First  Nat. 
First  Nat. 
First  Nat. 
L'irst  Nat. 

First  Nat. 


Nelson,  97. 
New,  316. 
New  Milford, 

Northup,  .344. 
Northwestern 


Nat. 


Pease,  171. 
.  Peavy  Eleva- 

Peisert,  336. 
.  Peltz,  72. 


Pierson,  231, 
Bank  v.  Reed,  298. 


Bank  v.  Reese,  299. 
Bank  v.  Rex,  17. 
Bank  v.  Richer,  161. 
Bank  v.  Security  Nat. 

Bank  of  Sioux  City,  79. 
First  Nat.  Bank  v.  Seldeu,  424. 
I'irst  Nat.     Bank     v.     Sherburne, 

231,  2.33. 
First  Nat. 

143. 
First  Nat. 
First  Nat.  Bank 
First  Nat.  Bank 

219. 
First  Nat.  Bank  v. 
First  Nat.  Bank  v. 
First  Nat.  Bank  v. 

280. 
First  Nat 
First  Nat 
First  Nat, 


Bank    v.    Shoemaker, 

Bank  v.   Shreiner,   72. 
V.  Smith,  244. 
V.   Sprague,  216, 


Stapf.  76. 
Stauffer,  242. 
Stewart,  2.50, 


Bank  v.  Strang,  16. 
Bank  v.   Strauss,  350. 
Bank  v.  Tinstman,  241. 
First  Nat.  Bank  v.  Turner,  245. 
First  Nat.   Bank  v.   Union  Trust 

Co.,  1.33.  141. 
First  Nat.  Bank  v.   Valley   State 

Bank,  48. 
First  Nat.  Bank  v.  Watt.  243. 
First  Nat.  Bank  v.  Wattles,  52. 
First  Nat.  Bank  v.  Whitman,  128, 

1.36,  137,  139,  140. 
First  Nat.    Bank    v.    Wilke.sbarre 

Lace  Mfg.  Co.,  254. 
First  Nat.  Bank  v.  Wilmington  & 

W.  R.  Co.,  205,  206,  208. 
First  Nat.  Bank  v.  Zeut,  16,  17. 
First  Presbyterian  Church  v.  Na- 
tional State  Bank,  281. 
Firth  V.  Brooks.  110. 
Fish  V.  Olin,  418. 
Fisher  ,v.  Hanover  Nat.  Bank,  73. 
Fisher  v.  Knight,  68. 
Fisher  v.  Murdock,  227. 
Fitzgerald  v.  State  Bank,  211. 
Flanagan  v.  Nash.  460. 
Flatow  V.  Jeffer.son  Bank.  235. 
Fleckner  v.  Bank  of  United  States, 

228,  319,  322. 


CASES   CITED 
[The  figures  refer  to  pages] 


390 


Fletcher  v.  Sharpe,  44. 
Flickinger  v.  U.  S.,  409. 
Floreuce    Mining    Co.    v.    Brown, 

128. 
Flouruoy  v.  First  Nat.  Banlc,  72. 
Flynn  v.  Third  Nat.  Banlc,  402. 
Fosarties    v.    President,    etc.,    of 

State  Banlv,  129. 
Foley  V.  Hill,  12,  13. 
Follansbee  v.  Parker,  26. 
Foote  V.  Utah  Commercial  &  Sav. 

Bank,  .3.']0. 
I'orbes    v.    Boston    &    L.    R.    Co., 

2.53. 
Forbes  v.  First  Nat.  Bank.  70. 
I'ordred     v.      Seamen's      Savings 

Bank,  1.54. 
Ford's  Adm'r  v.  Thornton,  6,5. 
Fordyce  v.  Kosminski,  170. 
Forrest     v.     Safety     Banking     & 

Trust  Co.,  76. 
Forschirm  v.  Mechanics'  &  Trad- 
ers' Bank,  -62. 
Fort  y.  First  Nat.  Bank,  20. 
Ft.    Dearborn    Nat.    Bank    v.    Se- 
curity Bank,  193. 
Ft.   Dearborn  Nat.  Bank  of  Chi- 
cago V.  Seymour,  336,  338. 
Fortier  v.  Delgado  &  Co.,  130. 
Fortier     v.     New     Orleans     Nat. 

Bank,  252. 
Foss  V. -First  Nat.  Bank,  51,  430. 
Foss   V.   Lowell    Five   Cents    Sav. 

Bank,  52,  454. 
I'oster  V.  Bank  of  Abingdon,  305, 

306. 
Foster  v.  Bank  of  New  Orleans, 

.59. 
Foster  v.  Chase,  383. 
Foster  v.  Lincoln,  391. 
Foster  v.  Lincoln's  Ex'r,  390. 
Foster  v.    President,   etc.,   of   Es- 
sex Bank.  16.  18,  23. 
Foster  v.  Swasey,  54. 
Foster  v.  Wilson.  383. 
Fouche  V.  Merchants'  Nat.  Bank 
of  Rome,  344. 


Fourth  Nat.  Bank  of  Chicago  v. 
City  Nat.  Bank  of  Grand  Rap- 
ids, 129.  _^ 
Fourth   Nat.   Bank  of  Cincinnati 

V.  Mayer,  32. 
Fourth  Street  Nat.  Bank  v.  Yard- 
ley,  53,  130. 
Fowler  v.  Crouse,  .390. 
Fowler    v.    Equitable    Trust    Co., 

237. 
Fowler  v.  Gowing,  386,  387. 
Francis  v.  People's  Nat.  Bank,  58. 
Francois  v.  Lewis,  79. 
Frank  v.  Bingham,  209. 
I'rankfort  Bank  v.  Johnson,  310. 
Franklin  Bank,    In   re,   349. 
Franklin  Bank   v.   Byram,   83. 
Franklin  Bank  v.  Freeman,  100. 
L'ranklin  Bank  v.  Steward.  .329. 
Franklin  Bank    of    Cincinnati    v. 
Commercial  Bank  of  Cincinnati, 
248. 
Franklin    County    Nat.    Bank    v. 

Beal,  206. 
Franklin  Sav.  Bank  v.  Fatziuger, 

444. 
Frater  v.  Old  Nat.  Bank  of  Provi- 
dence, R.  I.,  .385. 
Frazier  v.  Willcox,  239. 
Freeman  v.  Citizens'  Nat.  Bank, 

193,   201. 
I'reeman    v.    Exchange    Bank    of 

Macon,  .32. 
Freeman    Mfg.    Co.    v.    National 

Bank  of  Republic,  427. 
Freeman's  Nat.  Banlv  v.  National 
Tube-Works    Co.,    30,    31,    205, 
206,  220. 
Freilierg  v.  Cody.  110. 
Freil)erg  v.  Stoddard,  209,  358. 
Frelinghuysen  v.  Nugent,  355. 
French  v.  Eastern  Trust  &  Bank- 
ing Co.,  26. 
French  v.  Irwin,  137. 
Freund  v.  Im))orters'  &  Traders' 
Nat.  Bank.  1.32,  137. 


coo 


CASES  CITED 
[The  figures  refer  to  pages] 


Fricano  v.   Columbia  Nat   Bauk, 

156. 
Fritz  V.  Kennedy,  122, 
Frontier  Bank  v.  Morse,  259. 
Fulton  Bank  v.   New  York  &   S. 

Canal  Co.,  43. 
Furber  v.  Dana,  63,   67,  72,  110, 

211.  350. 
Furlier  v.  Stephens,  351. 
F.    &    M.    Bank    of    Memphis    v. 

White,  262. 


©age  V.  Sanborn,  251. 

Gage    Hotel    Co.    v.    Union    Nat. 

Bank,  129. 
Gaither  v.  Farmers'  &  M.  Bank, 

237. 
Gale   V.    Chase   Nat.    Bank,    320, 

326. 
Gale  V.  Drake,  56. 
Gallo  V.  Brooklyn  Savings  Bank, 

171. 
Ganley  v.  Troy  City  Nat.  Bank, 

17. 
Gardner  v.  First  Nat.  Bank,  65. 
Gardner's  Estate,  In  re.  81. 
Garnett  v.  McEhven,   146. 
Garrettson     v.     North     Atchison 

Bank,  97,  139. 
Garrison  v.  Union  Trust  Co.,  222. 
Garthwaite  v.  Bank  of  Tulare,  96. 
Gaston    v.   American    Exch.    Nat. 

Bank,  336. 
Gate  City  Building  &  Loan  Ass'n 

V.  National  Bank  of  Commerce, 

120,  125. 
Gearns  v.  Bowery  Sav.  Bank,  453. 
Geary  v.  Physic,  106. 
George  v.  Wallace,  395. 
Geor^'ia  Nat.  Bank  v.  Henderson, 

100. 
Georgia  R.  &  Banking  Co.  v.  Love 

&  Good  Will  Soc,  160. 
Georgia  Seed  Co.  v.  Talmadge  & 

Co.,  65,  128. 


Gerhart  v.  Boatmen's   Sav.  Inst., 

198. 
German-American  Bank  v.  Third 

Nat.  Bank,  202,  209. 
German  Exch.  Bank  v.  Commis- 
sioners of  Excise,  51. 
German  Nat.  Bank  v.  Burns,  196. 
German    Nat    Bank   v.    Farmers' 

Deposit  Nat  Bauk,  ISO. 
German    Nat.    Bank    of    Beatrice 

V.  Beatrice  Nat.  Bank,  97. 
German  Nat.  Bank  of  Denver  v. 

National  State  Bank,  55. 
German  Sav.  Bank  v.  Wulfekuh- 

ler,  279. 
German  Sav.  Bank  of  Davenport 

V.  Citizens'  Nat.  Bank,  60,  90, 

171. 
Germauia  Bank  of  Minneapolis  v. 

Boutell,   161,  164,   165. 
Germania  Nat.  Bank  v.  Case,  249, 

385,  390. 
Gerner  v.  Thompson,  404. 
Gesas,  In  re,  211. 
Gibbons  v.  Anderson,  302. 
Gibbons  v.  Hecox,  210. 
Gibbs,  In  re,  444. 
Giblin  v.  McMuUen,  17,  18. 
Gibson  v.  Goldthwaite,  310. 
Gibson  v.  National  Park  Bank  of 

New  York,  53,  54. 
Gifford  V.  Hardell,  111,  123. 
Gilford  V.  Rutland  Sav.  Bank,  451, 

453. 
Giles  V.  Perkins,  37. 
Girard    Bank   v.    Bank   of   Penn 

Tp.,  56,  93,  132s 
Givan  v.  Bank  of  Alexandria,  196, 

216. 
Gladstone  Exch.  Bank  v.  Keating, 

157. 
Glynn  County  v.  Brunswick  Term- 
inal Co.,  44. 
G.  Ober  &  Sons  Co.  v.  Cochran, 

208. 
Godin  V.  Bank  of  Commonwealth, 

158. 


CASES 
[The  figures 

Goelz  V.  People's  Sav.  Bank,  458. 
Goetz   V.    Bank    of   Kansas   City, 

255. 
Goldrick   v.   Bristol   County   Sav. 

Bank,  452. 
Goodell    V.    Brandon    Nat,    Bank, 

91.  94. 
Goodrich's  Ex'r  v.  Rutland  Sav. 

Bank,  459. 
Goodwin  v.  Cobe,  118. 
Gordon    v.    Lansing    State    Sav. 

Bank,  101,  103.  104. 
Gordon  v.  Levine,  110,  112,  124. 
Gores  v.  Day,  305. 
Gores  v.  Murphy,  306. 
Go''nian  v.  Gorman,  460. 
Go^^hen    Nat.    Bank    v.    Bingham, 

n3. 

GvHham  v.  Orapge  County  Nat. 
Bank,  341. 

Grammel  v.  Carmer,  99,  352. 

Grange  v.  Reigh,  110. 

Grant  v.  MacNutt,  186. 

Grant  v.  Spokane  Nat.  Bank,  433. 

Grant  County  Deposit  Bank  v. 
Points,  300. 

Gray  v.  Farmers'  Nat.  Bank,  324. 

Gray  v.  Johnston,  45,  46. 

Gray  v.  Merriam,  19,  20. 

Green  v,  Bennett,  412. 

Green  v.  Camden  Nat.  Bank,  70. 

Green  v.  Odd  Fellows  Sav,  &  Com- 
mercial Bank,  92. 

Greenawalt  v.  Wilson,  314,  324. 

Greene  v.  Bank  of  Camas  Prairie, 
43. 

Greene  v.  .Jackson  Bank,  210. 

Greene's  Estate,  357. 

Greenfield  Savings  Bank  v.  Sto- 
well,  170. 

Greenhalgh  Co.  v.  Farmers'  Nat. 
Bank,  26. 

Greenwald  v.  Ford,  162. 

Greenwood  Grocery  Co.  v.  Cana- 
dian County  Mill  &  Elevator 
Co.,  254. 

Grt>gg  V,  Beane,  111. 


CITED  601 

refer  to  pages] 

Gregg  V.  George,  108,  114. 

Griltin  v.  Chase,  208. 

Grilhn  v.  Erskine,  3Wr 

Griffin  v.  Rice,  58. 

(Jrissom  v.  Commercial  Nat.  Bank, 

59. 
Groff  V.  Stitzer,  336. 
Grow  V.  Cockrill,  287,  325. 
Guarantee  Co.  of  North  America 

V.     Mechanics'     Sav.    Bank    & 

Trust  Co.,  330. 
Guarantee   Oo.   of   North  Dakota 

V.  I  Ian  way,  433. 
Guaranty  Trust  Co.  of  New  York 

V.  Groti'ian,  255. 
Guelif-k   V.   National  State  Bank, 

216,  219. 
Guernsey  v.  Black  Diamond  Coal 

&  Min.  Co..  314: 
Guernsey  v.  Marks,  71. 
Guignon  v.  First  Nat.  Bank,  209. 
Guild  V.  First  Nat.  Bank,  241. 
Gumbel  v.  Abrams,  60. 
Gunster  v.  Scranton  Illuminating 

Heat  &  Power  Co.,  339,  344. 
Guthrie  v.  Harkness,  379,  431. 
Guthrie  v.  Reid,  243. 
Guthrie  Nat.  Bank  v.  Gill,  129. 

H 

Haas  &  Co.  v.  Citizens'  Bank  of 
Dyersburg,  254. 

Hackett  v.  First  Nat.  Bank,  169. 

Haeloett  v.  Reynolds,  223. 

Haddock  v.  Citizens'  Nat.  Bank. 
193. 

Hager  v.  American  Nat.  Bank, 
438. 

Hager  v.  National  German-Amer- 
ican Bank,  .334. 

Hagerstown  Bank  v.  Adams  Exp. 
Co.,  263. 

Haggerty  v.  Baldwin,  109. 

Hale  V.  Rawallie,  19. 

Hale  V.  Richards,  84. 

Hales  V.  Seamen's  Bank,  94. 


(J02 


CASES   CITED 
[The  figures  refer  to  pages] 


Hall    T.    Farmers'    &    Mercliants' 
Bank,  282. 

Hall  V.  First  Nat.  Bank,  245. 

Hall  V.  Fuller,  167. 

Hall  V.  Keller.  254. 

Hallem  v.  Tillinghast.  206. 

Hallenl)eck  v.  Hallenbeck,  4G0. 

Hallett,  In  re,  357. 

Halsey  v.  Warden.  252. 

Hamilton  v.  Winona  Salt  &  Lum- 
ber Co..  110. 

Hamlin  v.  Simpson.  117. 

Hancock  v.  Lyon.  55. 

Drovers'    Nat. 


Bank, 
Manufacturers'    Trust 


Hanna    v. 

144.  147 
Hanna    v. 

Co..  76. 
Hannon  v.  Williams.  443,  450. 
Hanuum    v.    Bank    of   Tennessee, 

61. 
Hanover  Nat.  Bank  v.  First  Nat. 

Bank,  283.  315. 
Hanover  Nat.  Bank  of  New  York 

V.  Suddath.  211,  212. 
Hanson  v.  Heard,  321.  322. 
Hanson  v.  Roush,  44.  3.59. 
Hardy    v.    Chesapeake   Bank,   88, 

89.  160. 
Hare  v.  Henty,  110. 
Hargrave  v.  Duesenberry,  258. 
Harker  v.  Anderson,  118. 
Harley  v.  Thornton,  2.59. 
Harmanson  v.  Bain,  99,  346. 
Harmon  v.  National  Park  Bank, 

385. 
Harmon  v.  Old  Detroit  Nat.  Bank, 

171,  175. 
Harper  v.  U.  S.,  410. 
Harrington  v.  First  Nat.  Bank,  82. 
Harris   v.    American    Building    & 

Loan  Ass'n,  334. 
Harris  v.  First  Nat.  Bank,  352. 
Harris  v.  Randolph  County  Bank, 

283,  349. 
Harris  Banking  Co.  v.  Miller,  50. 
Flarris  &  Co.  v.  Chipman,  48. 
Harrison  v.  Harrison,  71. 


Harrison  v.    Nicollett  Nat.   Bank 
of  Minneapolis.  100. 

Harrison  v.  Smith,  359. 

Harrison  v.  Wright.  99,  128,  352. 

Hart  V.  Hanson.  305. 

Harter  v.  Mechanics'  Nat.  Bank. 
90.  100,  171. 

iiaseltine  v.   Central   Nat.   Bank, 
244. 

Hasvvell  v.  Farmers'  &  Mechanics' 
Bank.  60. 

Hatch  v.  First  Nat.  Bank.  77,  78. 

Hatch  V.  Fourth  Nat.  Bank,  70. 

Hatch  V.   Johnson  Loan  &  Trust 
Co.,  15G.  417. 

Havana  Cent.  R.  Co.  v.  Knicker- 
bocker Trust  Co.,  48. 

Hawkeye   Gold    Dredging   Co.    v. 
State  Bank  of  Iowa  Falls,  50. 

Hawkins  v.  Cleveland,  C.,  C  &  St. 

^  L.  R.  Co..  44. 

Hawley  v.  Hurd,  364. 

Hawley  v.  Jette,  100. 

Haxtun  v.  Bishop.  260,  262. 

Hayden  v.  Alton  Nat.  Bank,  71. 

Hayden    v.   Chemical   Nat.   Bank, 
346,  347,  422,  423. 

Hayden  v.  Thompson,  404,  418. 

Hayden  v.   Williams,  380. 

Hayes  v.  Beardsley,  348,  423. 

Hayes   v.    Fidelity   Ins.    Trust   & 
Safe-Deposit  Co.,  386. 

Hayes   v.    Northern    Pac.    R.   Co., 
132. 

Hayes  v.  Schoemaker,  389. 

Hayes  v.  U.  S..  411. 

Hazard  v.  National  Exch.  Bank, 
376. 

Hazelton  v.    Union   Bank  of   Co- 
lumbus, 24,  316,  329. 

Hazen  v.  Lyudonville  Nat.  Bank, 
427. 

Heath  v.  New  Bedford  Safe  De- 
posit &  Trust  Co.,  47. 

Heath  v.  Portsmouth  Sav.  Bank, 
451,  452. 


CASES 

[The  figures 
Heavy  v.  Coinmereial  Nat.  Bank, 

175. 
Heidelbach      y.      National      Park 

Bank,  Go. 
Ilelene  v.  Corn  Exch.  Bank,  51. 
Hollnian  V.  iMcWillianis,  52. 
Hemphill  v.  Yerkes.  50. 
Henderson  v.  O'Conor,  209. 
Hender.son  &  Co.  v.  United  States 

Nat.  Bank,  147. 
Hendley  v.  Globe  Refinery  Co.,  .30. 
Hennessy   Bros.   &    Evans    Co.   v. 

Memphis   Nat.  Bank,  82. 
Henry  v.  Allen,  3.39. 
Henry  v.  Martin,  44. 
Henry  v.  Northern  Bank  of  Ala- 
bama, .329. 
Henshaw  v.  Root,  108,  115,  116. 
Hepburn     v.     Citizens'     Bank    of 

Louisiana,  26. 
Herron  v.  Vance,  444. 
Hewitt  V.  Kaye,  154. 
Hey  wood  v.  Pickering,  110,  113. 
Hier  v.  Miller,  326. 
Hieronimus  v.  Sweeney.  445. 
Higgins  V.  Hayden.  350. 
Iliggins  V.  Worth ington,  346. 
Hilburn  v.  Mercantile  Nat.  Bank 

of  Pueblo,  60. 
Hill  V.  INIiles,  3.58. 
Hill  V.  National  Bank,  24.3. 
Hill  V.  Stevenson,  458. 
Hill  V.  Western  &  A.  R.  Co.,  347. 
Hilliard  v.  Lyons,  .3.39. 
Hillsiuger  v.  Georgia  R.  Bank,  81. 
Hilton  V.  .Jesup  Banking  Co.,  146. 
Himmelmann  v.  Hotaling,  126. 
Hindman  v.  First  Nat.  Bank,  331, 

332. 
Hinsdale  v.  Bank  of  Orange,  264. 
Hintermister  v.  First  Nat.  Bank, 

239.  242.  243. 
Hirschfeld  v.  Smith,  199. 
Hitchcock  V.  Bank  of  Suspension 

Bridge.  199. 
Hitchcock  V.  Edwards.  102. 


CITED  603 

refer  to  pages] 

Hitchcock's  Heirs  v.  United  States 

Bank  of  Pennsylvania,  239. 
Hol:art  V.  Dovell,  'Sm?- 
liobart  v.  Gould,  .394. 
Holjart  Nat.  Bank  v.  McMurrough, 

97. 
Hobbs  V.  Boatright.  .332. 
Hoblis    v.    Chemical    Nat.    BauL, 

326. 
Hodge  V.  Smith,  41. 
Hodge's  Ex'r  v.  First  Nat.  Bank, 

314,  324. 
Hodgin  V.  People's  Nat.  Bank,  67, 

70. 
Hodgson  v.  McKinstrey,  412. 
Hoffman  v.  American  Exch.  Nat. 

Bank,  175,  176. 
Hoffman  v.    Bank  of  Milwaukee, 

255. 
Hoffman  v.  First  Nat.  Bank,  .32. 
Holden  v.  New  York  &  E.  Bank, 

336,  344. 
Holden  v.  Phelps.  447. 
Holden  v.  Upton,  447. 
Holder  v.  Western  German  Bank, 

208,  214. 
Holland  Trust  Co.  v.  Waddell.  78. 
Hollowell    Sav.   Inst.   v.   Titcomb, 

458. 
Holm  V.  Atlas  Nat.  Bank,  342. 
H^olmes,    In  re,  356. 
Holmes  v.  Boyd,  281. 
Holmes  v.  McDonald,  .301. 
Holmes  v.  Roe,  110,  112. 
Holmes  v.  Trumper,  170. 
Holt  v.  Bacon,  324. 
Holt  V.  Winfield  Bank,  201. 
Home  Nat.  Bank  v.  Newton.  62. 
Home  Sav.  Bank  v.  Des  iMoines, 

438. 
Home  Sav.  Bank  o^  Iowa  Falls  v. 

Otterbach,  .326. 
Homer  v.  National  Bank  of  Com- 
merce, 65. 
Ilonig  v.  Pacific  Bank,  47. 
Hood  V.   Kensington   Nat.   Bank, 
47. 


G04  CASES  CITED 

[The  figures  refer  to  pages] 

Hood  V.  Wallace,  375,  3S5. 

Hopkinson  v.  Forster,  97,  128. 

Horton  v.  Mercer,  387. 

Hosie.  In  re,  21. 

Hotcliklss  V.   Artisans'  Bank,  25. 

Hot  Springs  Independent  School 
'Dist.  No.  10  of  Fall  River  Coun- 
ty V.  First  Nat.  Bank,  433. 

Hough  Ave.  Savings  &  Banking 
Co.  V.  Andersson,  453. 

Houghton  V.  First  Nat.  Bank,  325, 
320. 

Houghton  V.  Hubbell,  384. 

House  V.  Kountze,  128. 

Howard  Nat.  Bank,  Ex  parte,  66, 
71. 

Howarth  v.  Ellwanger,  394. 

Howe  V.  Barney,  401. 

Howell  V.  Adams,  81. 

Hoyt  V.  Byrnes,  258. 

Hoyt  V.  Seeley,  117. 

Hubbard  v.  Charlestown  Branch 
R.  Co.,  83. 

Hubbard  v.  New  York  &  H.  R. 
Co.,  5. 

Hubbell  V.  Houghton,  384. 

Hudson  V.  Roxbury  Inst,  for  Sav- 
ings, 451. 

Hudson  Trust  Co.  v.  Chappelle, 
84. 

Hulitt,  In  re,  374. 

Hulitt  V.  Bell,  374. 

Hun  V.  Cary,  301,  447. 

Hunt,  Appeal  of,  79. 

Hunt  V.  Hauser  Malting  Co.,  278, 
291. 

Huntington  v.  National  Sav. 
Bank,  443. 

Hurd  v.  Green,  445. 

Hutchins  v.  Planters'  Nat.  Bank, 
2SG. 

Hutchinson  v.  National  Bank,  208. 

Hutchinson  v.  President  &  Di- 
rectors of  Manhattan  Co.,  69, 
22.3. 

Hyde  v.  First  Nat.  Bank,  217. 

Hyland  v.  Roe,  3.51. 


Ida  County  Sav.  Bank  v.  Seiden- 

sticker,  330. 
Illinois  Trust  &  Sav.  Co.  v.  First 

Nat.  Bank,  209. 
Imperial  Bank  v.  Bank  of  Hamil- 
ton, 168. 
Importers'  &  Traders'  Nat.  Bank 

V.  Littell,  243. 
Importers'  &  Traders'  Nat.  Bank 

v.  Peters,  210,  218,  352,  357. 
Independent    Dist.    of    Boyer    v. 

King,  44,  359. 
Indig  V.  Bank,  217. 
Indig   V.    National    City   Bank   of 

Brooklyn,  58,  196. 
Industrial    Bank    of    Chicago    v. 

Bowes,  98,  118. 
Industrial  Trust  Co.  v.   Scanlon, 

'!'  V  461. 
Inc.     a'ial  Trust,  Title  &  Savpgs 

Co.  V.  Weakley,  109. 
Ingersoll  v.  First  Nat.  Bank,  53. 
Ingwersen  v.  Bucholz,  74. 
Innerarity     v.     Merchants'     Nat. 

Bank,  339,  340,  342. 
International    Bank    v.    Bradley, 

237. 
International  Bank  v.  Jones.  70. 
International  Trust  Co.  v.  Weeks, 

432. 
Interstate  Nat.  Bank  v.  Claxtou, 

48,  69. 
Interstate  Nat.  Bank  v.  Ferguson, 

287. 
Interstate  Trust  &  Banking  Co.  v. 

Reynolds,  288. 
Iowa  State  Sav.  Bank  v.   Black, 

320. 
Irish    V.    Citizens'    Trust    Co.    of 

Utica,  N.  Y.,  64,  65,  66. 
Iron  City  Nat.  Bank  v.  Ft.  Pitt 

Nat.  Bank,  161. 
Iron  City  Nat.  Bank  v.  McOord, 

104. 
Irons     V.     Manufacturers'     Nat. 

Bank,  383,  387,  392,  414,  422. 


Irvine  v.  Dean,  GO. 

Irving    Bank    v.    Wetherald,    133, 

142,  150. 
Irwin   V.   riantei's'    Bank,   264. 
Irwin  V.  Reeves  Pulley  Co.,  216, 

219. 
Isnartl  v.  Torres,  169. 
Israel  v.  State  Nat.  Bank  of  New 

Orleans,  88. 
Italian  Fruit  &  Importing  Co.  v. 

Penniman,  358. 
Ivory  V.  Bank  of  Missouri,  100. 


Jack  V.  Klepser,  74. 

Jack  V.  Moyer,  84. 

Jacks  V.  Darrin,  125. 

Jackson  v.  Brown,  280. 

Jackson  v.  Receivers  of  People's 
Bank  of  Patterson,  353. 

Jackson  Ins.  Co.  v.  Cross,  27. 

Jackson  Paper  Mfg.  Co.  v.  Com- 
mercial Nat.  Bank,  132,  134. 

Jacobs'  Pharmacy  Co.  v.  Southern 
Banking  &  Trust  Co.,  293. 

Jaffe  V.  Bowery  Bank,  52. 

Jagger  v.  National  German-Amer- 
ican Bank.  197. 

James  Clark  Co.  v.  Colton,  .348. 

James  Reynolds  Elevator  Oo.  v. 
.Merchants'  Nat.  Bank,  69. 

James  River  Nat.  Bank  of  James- 
town v.  Weber,  149. 

Jamieson  &  McFarland  v.  Helm, 
175. 

Jamison  v.  Howard  Lockwood  & 
Co.,  68. 

Janin  v.  London  &  San  Francisco 
Bank,  87,  160. 

Jefferson  County  Sav.  Bank  v. 
Commercial  Nat.  Bank,  203. 

Jefferson  Nat.  Bank  v.  Bruhn, 
241. 

Jefferson  County  Sav.  Bank  v. 
Hendrix,  194. 


CASES   CITED  60.J 

[The  figures  refer  to  pages] 

Jemison  v.  Citizens'  Sav,  Bank  of 

Jefferson,  291,  445. 
.Teukins  v.  Fowler,  55. 
Jenkins  v.  National"t^lage  Bank 

of  Bowdoinham,  20. 
Jenkins  v.  Neff,  440. 
Jenkyns  v.  Brown,  252. 
Jerome  v.  Cogswell,  373.  380. 
Jewett  v.  U.  S.,  406,  409. 
Jewett  V.  Yardley,  352. 
J.   M.   James   Co.   v.   Continental 

Nat.  Bank,  144,  145. 
Jochumson  v.  Suffolk  Sav.  Bank, 

453. 
Johnson  v.  Brant,  54. 
Johnson  v.  First  Nat.  Bank,  173. 
Johnson  v.  Lafliu,  376.  389. 
Johnson     v.     National     Bank     of 

Gloversville,  241. 
Johnson    v.    Payne    &    Williams 

Bank.  67. 
Johnson  v.  Shuey,  52,  56. 
Johnston  v.  Humphrey,  74. 
Johnston  v.  Lafliu,  280,  376,  389. 
Johnston  Fife  Hat  Co.  v.  Nation- 
al Bank  of  Guthrie,  332. 
Jones,  Ex  parte,  431. 
Jones  V.  Crisp,  458. 
Jones  V.  Johnson,  298. 
Jones  V.  Piening.  74. 
Jordan  v.  National  Shoe  &  Leath- 
er Bank  of  New  York,  65. 
Jordan    Marsh    Co.    v.    National 

Shawmut    Bank,    90,    157,    158, 

171,  175. 
Josiah  Morris  &  Co.  v.  Alabama 

Carbon  Co.,  223. 
Joyce  V.  Cockrill,  210. 
Judy    V.     Farmers'     &    Traders' 

Bank,  68. 
Jumper  v.  Commercial  Bank,  24. 
Jumper   v.   Commercial   Bank   of 

Columbia,   25. 
Jung  V.  Second  Ward  Sav.  Bank, 

56. 


GOG 


CASES   CITED 
[The  figures  refer  to  pages] 


K 


Kansas  Nat.  Bank  v.  Quiuton,  20. 

Kansas  State  Bank  v.  First  State 
Bank,  206. 

Kansas  Val.  Nat.  Bank  v.  Row- 
ell,  251. 

Kassler  v.  Kyle,  279. 

Kavanagh   v.    Bank   of   America, 

77.  , 

Kearny  v.  Metropolitan  Trust  Co. 

of  Citv  of  New  York,  90.  171. 
Keeue  v.  Beard,  97,  120,  121.  163. 
Kelley  v.  Brown,  101,  118. 
Kelley  v.  Buffalo  Sav.  Bank,  454. 
Kelley   v.   Clienango   Valley   Sav. 

Bank,  25. 
Kelly  V.  Beers,  52,  459,  460. 
Kelly  V.  Phelan,  210. 
Kelsey  v.  National  Bank  of  Craw- 
ford vCounty,  367. 
Kemble  v.  Nat.  Bank  of  Rondout, 

26. 
Kennedy  v.  Gibson,  393,  394,  415, 

418. 
Kennedy  v.  Knight,  273. 
Kennedy    v.    New    Orleans    Sav. 

Inst.,  450. 
Kenuetli    Inv.     Co.    v.    National 

Bank  of  the  Republic,  89. 
Kent  V.  Dawson  Bank,  215,  217. 
Kenton    Ins.    Co.    v.    First    Nat. 

Bank,  60. 
Kentucky  Flour  Oo.'s  Assignee  v. 

Merchants'  Nat.  Bank,  65. 
Kenyon  v.  Fowler,   384. 
Kerfoot  v.  Farmers'  &  M.  Bank, 

282. 
Kerr  v.  People's  Bank,  47,  51. 
Kerr  v.  Urie,  387. 
Kershaw  v.  Ladd,  113,  194. 
Key  V.  Knott.  257. 
Keyes  v.  Bank  of  Hardin,  189. 
Keyser  v.  llitz,  366,  383,  384. 
Kilby  V.  First  Nat.  Bank,  74. 
Killt'U  V.  Barnes,  13. 
Killen  v.  State  Bank,  .305. 
Kimball  v.  Apsey,  368,  389. 


Kimball  v.  Leland,  458. 
Kinibro  v.  Bank  of  Fulton,  263. 
Kimins  v.  Boston  Five  Cent  Sav. 

Bank,  451,  453. 
Kimmel  v.  Bean,  69. 
King  v.  Armstrong,  393. 
King  V.  Bowling  Green  Trust  Co., 

224. 
Kiiig  V.  Pomeroj*,  .395,  396,  414. 
Kingsley  v.  Whitman  Sav.  Bank. 

453. 
Kinyon  v.  Stanton,  108. 
Kirkham    v.    Bank    of    America, 

193,  202. 
Kirkpatrick  v.  Puryear,  123. 
Kirkwood  v.  First  Nat.  Bank,  77, 

78,  79. 
Kissam  v.  Anderson,  325. 
Klauber  v.  Biggerstaff.  78. 
Kleopfer  v.  First  Nat.  Bank,  145. 
Klepper  v.  Cox,  208. 
Kliug  V.  Irving  Nat.  Bank,  235. 
Kuapp  V.  Cowell,  02. 
Knobeloch      v.      Germania      Sav. 

Bank,  339. 
Knox  V.  Bank  of  United  States, 

239. 
Knoxville  Water  Co.  v.  East  Ten- 
nessee Nat.  Bank,  173. 
Koelzer  v.  First  Nat.  Bank,  93. 
Kortjohn     v.      Continental     Nat. 

Bank  of   St.   Louis,   65. 
Kuenster  v.  Woodhouse,  94. 
Kuflick  v.  Glasser,  115. 
Kummel  v.  Germania  Sav.  Bank, 

453. 
Kymer  v.  Laurie,  58. 


Ladd  v.  Androscoggin  County 
Sav.  Bank.  448,  451,  4.53. 

La  Dow  V.  First  Nat.  Bank,  240. 

La  Due  v.  First  Nat.  Bank,  99, 
127. 

Lafayette  Bank  v.  Bank  of  Illi- 
nois.   322. 

Laidlaw  v.  Pacific  Bank,  445,  446. 


Laird  v.  State.  97. 

Lake  v.  Artif?ans'  Bank,  235. 

Lake  Erie  &  W.  R.  Co.  v.  Indi- 
anapolis Nat.  Bank,  355. 

Lake  Nat.  Bank  v.  Wolfeborough 
Sav.  Bank.  432. 

Lamb  v.  Cecil.  322. 

Lauison  v.  Beard,  325,  338. 

LancMster  Bank  v.  Woodward,  83, 
126,  152. 

Lancaster  County  Nat.  I'.ank  v. 
Smith,  17. 

Landa  v.  Lattin  Bros..  255. 

Landa  v.  Traders'  Bank  of  Kan- 
sas City,  202. 

Land  Title  &  Trust  Co.  v.  North- 
western Nat.  Bank,  175. 

Langdale  v.  Citizens'  Bank  of 
Savannah,  453. 

Langlois  v.  Gragnon,  32G. 

Lanterman  v.  Travous,  35,  358. 

Lantry  v.  Wallace,  279,  375,  384. 

Larimer  v.  Beardsley,  376. 

Larson  v.  Breene,  137. 

Larson  v.  Utah  Loan  &  Trust  Co., 
2SS. 

Latimer  v.  Bard,  372. 

Latimer  v.  Citizens'  State  Bank, 
277. 

Latimer  v.  A'eader,  300. 

Lattan  v.  Van  Ness,  457. 

Laubach  v.  Leibert,  73. 

Lawrence  v.  Bank  of  Republic, 
68. 

Lawrence  v.  Greenup,  380. 

Lawrence  v.  Schmidt,  114. 

Lazear  v.  National  Union  Bank  of 
Maryland,  231,  2.33. 

Lazier  v.  Iloran,  58.  ^ 

Leach  v.  Hale,  287. 

Leach  V.  Hill,  138. 

Leaphart  v.  Commercial  Bank  of 
Columbia,  75. 

Lease  v.  Barschll,  .381. 

Leather  v.  Simpson.  255. 

Ijeathor  Manufacturers'  Nat. 
Bank  v.  Cooper,  4.30,  433. 


CASES  CITED 
[The  figures  refer  to  pages] 
Leather 


GOT 

Manufacturers'       Nat. 
Morgan,  S5,  87,  88,  89, 


r.ank  V 
160.  16(;. 

Leavitt  v.  I'n liner,  TtJT 

Leavitt  v.   Yates,  283,  309. 

Lebanon  Bank  v.  Mangan,  78. 

Lebanon  Nat.  Bank  v.  Karmany, 
243. 

Le  Due  V.  Moore,  341. 

Lee  V.  Marion  Nat.  Bank,  46. 

Lee  V.  Selleck,  200. 

Lee  V.  Smith.  326. 

Leffman  v.  Flanigan,  448. 

Leggett    V.    New    Jersey    :\Ifg.    & 
Banking  Co.,  314,  325. 

Lemoine  v.  Bank  of  North  Ameri- 
ca. 234. 

Lennan  v.  Pollock  State  Bank,  23. 

Leonard    v.    New    Bedford    Five 
Cents  Sav.  Bank,  55. 

Lester  v.  Given,  96,  115,  126. 

Lester-Whitney    Shoe   Co.   v.   Oli- 
ver Co.,  117. 

Levi    V.    National    Bank    of    Mis- 
souri, 202,   209. 

Levy  V.  Franklin  Sav.  Bank,  454. 

Lewis  V.  International  Bank,  1.55. 

Lewis  V.  Lynn  Inst,  for  Savings, 
442,  443,  449,  4.50. 

Lewis,    Hubbard   &   Co.  v.   Mont- 
gomery Supply  Co.,  110. 

Lewis  Leouhardt  &  Co.  v.  W.  II. 
Small  &  Co..  2.55. 

Leyson  v.  Davis,  431. 

L'llerbette      v.      Pittsfield      Nat. 
Bank,  293.  325. 

Llbby  V.  Union  Nat.  Bank,  282. 

Lieber    v.    Fourth    Nat.    Bank   of 
St.  Louis,  122. 

Lieberman    v.    First    Nat.    Bank, 
330. 

Life  Ass'n  of  America  v.  Levy,  5. 

Lilly   V.   Hamilton   Bank  of  New 
York,  341. 

Linn  County  v.  Farmers'  &  iler- 
chants'  Bank,  61. 

linton  v.  Childs,  436.  ^ 


G08 


CASES   CITED 
[The  figures  refer  to  pages] 


Litchfield  v.  Preston,  281. 

Little  V.  Phenix  Bank,  108. 

Little's  Adni'r  v.  City  Nat.  Bank, 
63. 

Livinsstain  r.  Columbian  Bank- 
in?  &  Trust  Co.,  346,  348,  352. 

Lloyd  V.  West  Branch  Bank,  319. 

Loan  &  Exchange  Bank  v.  Miller, 
S3. 

I,oan  &  Savings  Bank  v.  Farmers' 
&  Merchants'  Bank,  51,  153. 

Locke  V.  First  Nat.  Bank,  93. 

Logan  County  Nat.  Bank  v.  Town- 
send,  287,  293. 

Logan  Nat.  Bank  of  West  Liber- 
ty, Ohio,  V.  Williamson,  79. 

London  Chartered  Bank  v.  White, 
210. 

Loudon  &  S.  F.  Bank  v.  Parrott, 
72. 

Long  V.  Bank  of  Commerce,  200. 

T^3ng  V.  Bank  of  Yanceyville,  263. 

Long  V.  Emsley,  44. 

Long  V.  Straus,  76. 

Lonier  v.  State  Sav.  Bank,  128, 
158. 

Lord  V.  Hingham  Nat.  Bank,  200, 
216. 

Lorick  v.  Palmetto  Bank  &  Trust 
Co.,  146. 

Loring  v.  Brodie,  45,  336,  343. 

Louisiana  Bank  v.  Bank  of  Unit- 
ed States,  261. 

Louisiana  Ice  Co.  v.  State  Nat. 
Bank  of  New  Orleans,  185. 

Louisiana  Nat.  Bank  v.  Citizens' 
Bank  of  Louisiana,  135. 

Louisiana  State  Bank  v.  Senecal, 
312,  340. 

Loux  V.   Fox,   112. 

Low  V.  Taylor,  82. 

Lowenstein  v.  Bresler,  114,  203. 

Lowndes  v.  City  Nat.  Bank  of 
South  Norwalk,  151,  301,  332, 
344. 

Lowrey  v.  Murrell,  259. 

Loyd  V.  Lynchburg  Nat.  Bank, 
211. 


Lucas  V.  Coe,  386,  387. 
Lucas  V.  Dorrien,  211. 
Lumberman's  Bank  v.  Bearce,  236. 
Lumsdon  v.  Gilman,  39. 
Lund  V.  Seamen's  Bank  for  Sav- 
ings, 46,  50. 

M 

Maas   V.    German    Sav.   Bank   in 

City  of  New  York,  55. 
McAfee  V.  Bland,  44,  348. 
McBee  v.  Purcell  Nat.  Bank,  56. 
Macbeth  v.  North  «&  South  Wales 

Bank,  172. 
McBride  v.  Farmers'  Bank,  223. 
McBride  v.   Illinois    State   Bank, 

214. 
McCagg  V.  Woodman,  74. 
McCalmont  v.  Lanning,  334. 
McCann  v.  First  Nat.  Bank,  373. 
McCann  v.  State,  337.    ' 
McCarthy    v.    First    Nat.    Bank, 

245. 
McCartney  v.  Earle,  417,  432. 
McClaine  v.  Rankin,  393. 
McClane  v.  Fitch,  199. 
McClellan  v.  Chipman,  364. 
McCliutock   V.    Central    Bank   of 

Kansas  City,  227. 
McConville  v.  Gilmour,  421,  432. 
^IcCord  v.   California  Nat.  Bank 

of  San  Diego,  151. 
McCormick  Harvesting  Mach.  Co. 

V.  Yankton  Sav.  Bank,  207. 
McCormick  v.  Market  Nat.  Bank, 

270.  281,  291,  365,  431. 
McCoy  V.  World's  Columbian  Ex- 
hibition, 288. 
McCraith    v.     National    Mohawk 

Val.  Bank,  287. 
McCrory  v.  Chambers,  288. 
McCulloch  V.  Maryland,  361. 
McDonald  v.  Chemical  Nat.  Bank, 

347,  423. 
:McDonald  v.   Dewey.   390.   .391. 
McDonald  v.   State  of  Nebraska, 

432. 


CASES  CITED 
[The  figures  refer  to  pages] 


009 


McDonald  v.  Thompson,  393,  394. 

McDonald  v.  Williams,  380. 

McDowell  V.  I'aiik  of  Wilming- 
ton it  Brandy  wine,  67. 

McDowell  V.  President,  etc.,  of 
I'.ank  of  Wilmington  &  Brandy- 
wine,  62,  72. 

McElroy  v.  National  Sav.  Bank, 
460. 

McEwen  v.  Davis,  43,  57,  69. 

McFarlin  v.  First  Nat.  Bank,  370. 

]Mc(iorray  v.  Stockton  Sav.  & 
Loan  Soc,  77. 

McGraw  v.  Traders'  Nat.  Bank, 
85. 

McGraw  v.  Union  Trust  Co.,  353. 

McGregor  v.  Battle,  13,  348. 

jrcHenry  v.  Ridgley,  326. 

McTlroy  Banking  Co.  v.  Dickson, 
298. 

Mcintosh  v.  Lytle,  103,  104. 

Mclutyre  v.  Ingraham,  234. 

Mackall  v.  Goszler,  117. 

McKean  v.  German-American  Sav- 
ings Bank,  67. 

Mackersy  v.  Remsay,  215. 

JIcKinnon  v.  INIorse,  299. 

McKinster  v.  Bank  of  Utica,  194. 

3IcKnlght  v.  Parsons,  41. 

McKnight  v,  U.  S.,  406. 

McLain  v.  Wallace,  15,  44. 

McLaren  v.   State,  3,  4,  9. 

]McLaughlin  v.  First  Nat.  Bank, 
86. 

McLean  v.  Clydesdale  Banking 
Co.,  96. 

McLean  v.  La  Fayette  Bank,  238. 

McLean  v.  Lowe,  57. 

McLean  County  Bank  v.  Mitchell, 
S3. 

McLeod  V.  Evans,  207,  209,  358. 

McLoghlin  v.  National  Mohawk 
Valley  Bank,  61. 

Mc^Iahon  v.  German-American 
Nat.  Bank  of  Little  Falls,  76. 

McNeely    Co.   v.   Bank   of   North 
America,  87,  88,  160,  171. 
TIFF.BKS.&  B.— 39 


McNeil  V.  Wyatt,  272. 

.McNulta  V,  Corn  Belt  Bank,  291, 
310.  -*-' 

McNulta   V.    West   Chicago   Park, 
Com'rs,  44,  45. 

Madden  v.  Gaston,  106. 

Mahon  v.  South  Brooklyn  Sav. 
Inst,  454. 

Main.  Appeal  of,  460,  461. 

.Maisch  v.   Saving  Fund,  448. 

Mandeville  v.  Union  Bank,  58. 

.Manhattan  Bank  v.  Walker,  17. 

Mann  v.  Cartel*,  449. 

Mann  v.  Maun,  55. 

Manufacturers'  Nat.  Bank,  In  re. 
414. 

Manufacturers'  Nat.  Bank  v. 
Baack.  428. 

Manufacturers'  Nat.  Bank  v. 
Barnes,  88. 

Manufacturers'  Nat.  Bank  v.  Con- 

.     tinental  Bank,  30,  33,  210,  218. 

Manufacturers'  Nat.  Bank  v.  New- 
ell, 40. 

Manufacturers'  Nat.  Bank  v. 
Swift,  149. 

Manufacturers'  Nat.  v.  Thomp- 
son, 185. 

'Mapes  V.  Scott,  282. 

Mapes  V.  Second  Nat.  Bank,  329. 

Marbourg  v.    Brinkman,   111. 

Marcy  v.  Amazeen.  457. 

Marine  Bank  v.  Ferry's  Adm'rs, 
327. 

Marine  Bank  v.  Fulton  County 
Bank,  12.  15. 

Marine  Bank  of  Buffalo  v.  Butler 
Colliery  Co.,  82. 

Marine  Bank  of  Chicago  v.  Chand- 
ler, 59. 

Marine  Nat.  Banlv  v.  National 
City  Bank.  135,  168. 

^larsh,  Menvin  &  Lemon  v. 
^^loeler.  .334. 

Marshall  v.  Farmers'  &  Mechan- 
ics' Sav.  Bank  of  Alexander, 
301,  305.  306. 


GIO 

Marshall 

293. 
Martin  v. 

204. 
Mai'tiu    V 

catiir 
Martiu 


CASES   CITED 
[The  figures  refer  to  pages] 


Nat.    Bank    v.    O'Neal, 
Bank  of  United  States, 


Branch    Bank    of    De- 
280. 
V.  Funk,  457. 


Martin  v.  Hiberuia  Bank  &  Trust 
Co.,  215. 

Martiu  v.  Home  Bank,  108. 

Martin  v.  Kansas  Nat.  Bank,  43. 

Martin  v.  Miunekahta  State  Bank, 
50. 

Martin  v.  South  Salem  Land  Co., 
342. 

-Martin  v.  Webb.  312.  321.  324. 

Marvine  v.  Hyniers,  234,  237. 

Marx  V.  Parker,  53. 

Maryland  Trust  Co.  v.  National 
Mechanics'  Bank.  228. 

Marymont  v.  Nevada  State  Bank- 
ins  Board,  9. 

Marzetti  v.  Williams,  143,  147. 

Mason  v.  A.  E.  Nelson  Cotton  Co., 
255. 

Mason  v.  Farmers'  Bank  at  Pe- 
tersburg. 272. 

Mason  v.  Moore.  .301. 

[Masonic  Sav.  Bank  v.  Bangs' 
Adm'r,  211. 

Massey  v.  Fisher,  22.  356. 

Mather  v.  Gordon.  252. 

Matlock  V.  Scheuerman,  110,  125, 
127. 

^.latteson  v.  Dent,  388. 

Matteson  v.  Moulton.  140. 

Matthews  v.  Massachusetts  Nat. 
Bank,  319.  323. 

Maury  v.  Coyle.  19. 

Maury  v.  Ingraham,  2.37. 

flayer  v.  Chattahoochee  Nat. 
Bank,  53. 

May  V.  Jones,  199. 

Meadowcroft  v.  People,  8. 

Mead  V.  I'ettigrew,  315. 

Meads  v.  Merchants'  Bank  of  Al- 
bany, 132.  142,  .321. 

Means  v.  Bank  of  Randall.  2.53. 


Bank  of  Co- 


Mechanics'  Bank  v. 

lumbia,  319. 
Mechanics'  Bank  v.  Earp,  216. 
Mechanics'  Bank  v.  Seton.  .336. 
Mechanics'  Bank  at  Baltimore  v. 

Merchants'  Bank  at  Boston,  193. 
Mechanics'  Bank  of  New  Yoi'k  v. 

Straiton,  103. 
Mechanics'    &   Farmers'    Bank    v. 

Smith,  26. 
Mechanics'    &    Traders'    Bank    v. 

Banks,  26. 
Mechanics'    &    Traders'    Bank    v. 

Seitz,  72. 
[Memphis  Nat.  Bank  v.  Sneed,  337. 
Mendel  v.  Boyd,  326. 
Mercantile    Nat.     Bank    v.    New 

York.  440,  441. 
Mercantile  Trust  Co.  v.  St.  Louis 

&  S.  F.  R.  Co.,  357. 
JNIerced  Nat.  Bank  v.  Ivett,  347. 
Mercer  v.  Dyer,  74,  425. 
Merchants'  Bank  v.  Marine  Bank, 

329. 
Merchants'  Bank  v.  Spicer,  106. 
[Merchants'  Bank  of  New  York  v. 

Exchange    Bank    of    New    Or- 
leans. 168. 
[Merchants'  Bank  of  St.  Louis  v. 

Farmer,  272. 
[Merchants'  Bank  of  St.  Louis  v. 

Harrison,  280. 
Merchants'    Bank   of  A'aldosta   v. 

Baird,  285,  286. 
Merchants'    Exch.    Bank    v.    Mc- 

Graw.  253. 
?*lerchants'    Nat.    Bank    v.    Arm- 
strong, .332,  399. 
Merchants'   Nat.    Bank   v.    Baird, 

284. 
Merchants' 

128. 
Merchants' 

314. 
Merchants' 

364. 
[Merchants' 


Nat.  Bank  v.  Coates, 
Nat.  Bank  v.  Eustis, 
Nat.  Bank  v.  Ford, 
Nat.    Bank    v.    Good- 


man, 196,  216,  219. 


CASKS   CITED 
[The  figures  refer  to  pages] 


Gil 


Merchants'  Nat.  Rank  v,  Hanson, 
30,  231,  234. 

Merchants'  Nat.  Bank  v.  National 
Bank.  150.  1S3,  185. 

INIerchants'  Nat.  Bank  v.  National 
Eajile  Bank.  150,  178,  182. 

Merchants'  Nat.  Bank  v.  Ilitzin- 
ger,  m,  104. 

Merchants'  Nat.  Bank  v.  School 
Dist.  No.  8,  45,  356. 

Merchants'  Nat.  Bank  v.  State 
Nat.  Bank,  97.  114.  132,  140, 
141,  271,  319,  321.  .327. 

Merchants'  Nat.  Bank  v.  Wehr- 
mann.  288. 

Merchants'  Nat.  Bank  of  Gardner 
V.  Clark.  342. 

Merchants'  Nat.  Bank  of  Kansas 
City  V.  Lovitt.  339. 

Merchants'  Nat.  Bank  of  Min- 
neapolis V.  Gaslin.  412. 

Merchants'  Nat.  Bank  of  Peoria 
V.  Nichols  &  Shepard  Co.,  83. 

Merchants'  Nat.  Bank  of  Rome  v. 
Fouche,  374. 

Merchants'  Nat.  Rank  of  Savan- 
nah V.  Carhart,  19. 

Merchants'  Nat.  Rank  of  Savan- 
nah" V.  Demere,  212. 

Merchants'  Nat.  Bank  of  Wheel- 
ing V.  First  Nat.  Bank,  140. 

Merchants'  State  Bank  of  Fargo 
V.  Tnfts.  250. 

Merchants'  &  Farmers'  Bank  v. 
Austin,  208. 

Merchants'  &  Manufacturers' 
Bank  v.  Stafford  Nat.  Bank, 
217. 

Merchants"  &  Mfrs.'  Nat.  Banlc  v. 
Pennsylvania,  437. 

Merchants'  &  Mechanics'  Bank  of 
Wheeling  v.  Evans.  71. 

Merchants'  &  Planters'  Bank  v. 
Meyer.  43. 

Merchants'  &  Planters'  Bank  v. 
Pen  laud.  .3.30. 


Merchants"  &  Planters'  Nat.  Bank 
of  Union  v.  Clifton  Mfg.  Co., 
49.  8.3.  152.  .^.^ 

Mereness  v.  First  Nat.  Bank,  80. 

Meriden  Sav.  Bank  v.  McCor- 
mack,  458. 

Merrick  v.  Trustees  of  Bank  of 
Metropolis,  310,  311. 

Merrill  v.  First  Nat.  Bank,  419. 

Merrill  v.  National  Bank  of  Jack- 
sonville, 420. 

Merritt  v.  Gate  City  Nat.  Bank, 
108. 

Mershon  v.  Wheeler,  254. 

Metropolitan  Bank  v.  Godfrey. 
280. 

Metropolitan  Nat.  liank  v.  Clag- 
gett,  3(]6.  367. 

Metropolitan  Nat.  P.ank  of  Chica- 
go V.  Jones',  137. 

Metropolitan  Nat.  Bank  of  New 
York  V.  Loydi  36. 

Metropolitan  Stock  Exch.  v.  Lyn- 
donville  Nat.  Bank,  291. 

Metropolitan  Supply  Co.  v.  Gar- 
den City  Banking  &  Trust  Co., 
146. 

Metropolitan  Tinist  Co.  v.  McKin- 
non.  279. 

Metzger  '^.  Franklin  Bank,  175. 

Meuer  v.  Phenix  Nat.  Bank,  1.33. 

Meyer  v.  First  Nat.  Bank  of 
Cceur  d'Alene,  427. 

Meyer  v.  Indiana  Nat.  Bank,  175. 

jNIeyers  v.  New  York  Connty  Nat. 
Bank.  69. 

Miami  Exporting  Co.  v.  Clark. 
238. 

Michigan  Bank  v.  Williams,  268. 

Michigan  State  Bank  v.  Gardner, 
31. 

:Nridland  Nat.  Bank  v.  Rrightwell. 
201. 

^tlidland  Nat.  Rank  of  Kansas 
City  V.  Rrightwell,  33. 

Miller  v.  Austen,  76. 


G12 


Miller  v.  Clark.  45G. 
Miller  v.  National  Bank  of  Lan- 
caster, 431. 
Miller  v.  Race,  260. 
Miller  v.    Receiver    of    Franklin 

Rank,  73. 
Miller  v.   State  Bank  of  Duluth, 

49. 
Miller  v.  Western  Nat.  Bank,  91. 
Milliken  v.  Shopleigh,  222. 
Mills  V.  Nassau  Bank,  46. 
Mills  V.  Rice,  227. 
Milwaukee    Nat.    Bank     v.     City 

Bank,  200. 
Mine    &    Smelter    Supply    Co.    v. 

Stockgrowers'  Bank,  286. 
Minneapolis   Sash  &  Door  Co.  v. 

Metropolitan  Bank,  196. 
Minor  v.  Mechanics'  Bank,  319. 
Minot  V.  Russ,  137. 
:Minturn  v.  Fisher,  100,  118. 
Mirabita  v.  Bank,  252. 
ISIiser  V.  Currie,  210. 
Missouri  Pac.  R.  Co.  v.  Continen- 
tal Nat.  Bank.  93. 
Missouri  State  Bank  v.  South  St 

Louis  Foundry,  280. 
Mitchell  V.  Beckman,  442. 
Mitchell  V.  Easton,  80,  82. 
Mix  y.  National  Bank  of  Bloom- 

ington,   365. 
Modern  Woodmen  of  America  v. 

Union  Nat.  Bank.  76. 
Moise  V.  Chapman,  259. 
Montagu  v.  Pacific  Bank,  22. 
Montgomery  County  Bank  v.  Al- 
bany City  Bank,  193,  217. 
Montgomery  County    v.    Cochran, 

149. 
Montrose   Sav.   Bank  v.   Clausen, 

40. 
Monument    Nat.    Bank    v.    Globe 

Works,  293. 
Moore  v.  Hanscom,  46. 
Moore    v.    Louisiana    Nat.    Bank, 
203. 


CASES   CITED 
[The  figures  refer  to  pages] 

Moores    v.    Citizens'    Nat. 

330. 
Moors  V.  Drury,  254. 
jMoors  V.  Goddard,  37,  55. 
Moors  V.  Kidder,  254. 
Moors  V.  Wyman,  254. 


Bank, 


Moreland  v.  Brown,  22. 
^lorford  v.  Farmers'  Bank  of  Sar- 
atoga County,  285. 
Morgan  v.  Bank  of  State  of  New 

York,  94. 
Morrill  v.  Raymond,  53. 
Morris  v.    Beaumont    Nat.    Bank, 

166. 
Morris  v.  Enfaula  Nat.  Bank.  202. 
Morris  v.  First  Nat.  Bank,  334. 

Morris  v.    Georgia    Loan,    Sav.    & 
Banking  Co.,  344. 

Jlorris  v.  Third  Nat.   Bank,   230, 
231. 

Morris  v.  Union  Nat.  Bank,  193. 

Morrison  v.   Bailey,   100. 

Morrison  v.  McCartney,  108. 

Morse  v.  Chicago,  R.  I.  &  P.  R. 
Co.,  254. 

Morse     v.     Massachusetts     Nat. 
Bank,  138,  323. 

Morse  v.  Rice,  61. 

Morse  v.  U.  S.,  411. 

Moses  v.  President,  etc.,  of  Frank- 
lin Bank  of  Baltimore,  116,  128. 

Moss  V.  Whitzel,  394. 

Moule  V.  Brown,  111. 

Mound  City  Paint  &  Color  Co.  v. 
Commercial  Nat.  Bank,  190,  193. 

:\It.  :Morris  Bank  v.  Twenty-Third 
Ward  Bank,  178,  180,  185. 

Mt.  Sterling  Nat.  Bank  v.  Green, 
146. 

Mt.  Vernon  Bank  v.  Porter,  276. 

:Movius  V.  Lee.  401. 

:^lucnch  V.  Valley  Nat.  Bank,  62. 

[Nluir  V.  Citizens'  Nat.  Bank,  412. 

Mullick  V.  Radakissen,  97. 

Mulligan,  In  re,  357. 

Mult'iomah  County  v.  Oregon  Nat. 
Bank,  358. 


CASES  CITED 
[The  figures  refer  to  pages] 


G13 


Munn  V.  Burch,  15,  12'J. 
JNIimueiiyn  v.  Augusta  Sav.  Bank, 

45,  48,  93. 
Murcbisou  Nat.  Bank  v.  Dunn  Oil 

Mills  Co.,  34,  223. 
Murplii'oe  v.  Mobile,  53. 
Murphy  v.  Levy.  109. 
Murphy     v.      Metropolitan      Nat. 

Bank,  90,  95,  15S,  172. 
Murphy  v.  Pacific  Bank,  443. 
Murray  v.  Chambers,  432. 
Murray  v.  Judah,  147. 
Murry  Nelson  &  Co.  v.  Leiter,  227. 
Mussey  v.  President,  etc.,  of  Eagle 

Bank,  141.  321. 
Mutual  Accident  Ass'n  of  North- 
west V.  Jacobs,  21,  23. 
INIutual  Nat.  Bank  v.  Rotge,  137. 
Myers  v.  Board  of  Education,  44, 

359. 
IMyers  v.  Hettinger,  432. 
]Myers  v.  Southwestern  Nat.  Bank, 

88,  89. 
Myers  v.  Twelfth  Ward  Bank,  23. 

N 

Nance  v.  Hemphill,  8,  9. 
Naser  v.  First  Nat.  Bank,  218. 
Nash   V.   Second  Nat.   Bank,  210, 

223. 
Nashville  Trust  Co.  v.  Bank,  65. 
Nassau  Bank  v.  Jones,  277,  291. 
Nathans  v.  Ogdens.  105. 
National  Bank  v.  Norton,  337. 
National  Bank  of  America  v.  In- 
diana Banking  Co..  54. 
National  Bank  of  Auburn  v.  Lew- 

}s,  243. 
National    Bank   of    Brunswick   v. 

Sixth  Nat.  Bank,  285. 
National    Bank    of    Commerce    v. 

American  Exch.  Bank.  202.  . 
National  Bank    of    Commerce    v. 

Atkinson,  285.  317. 
'  National  Bank  '  of    Commerce    v. 

Galland,  365. 


National  Bank  of  Connnerce  v. 
Merchants'  Nat.  Bank,  203. 

National  Bank  or*Tbnnnerce  v. 
Shumway,  310,  312. 

National  Bank  of  Commerce  v. 
Wade,  402,  403,  404. 

National  Bank  of  Commerce  in 
St.  Louis  V.  Mechanics'  Ameri- 
can Nat.  Bank,  160,  181. 

National  P.ank  of  Commerce  of 
New  York  v.  National  Mechan- 
ics' Banking  Ass'n  of  New 
York,  168,  169. 

National  Bank  of  Commerce  of 
Pierre  v.  Feeney,  342. 

National  Bank  of  Commerce  of 
Seattle  v.  Johnson,  205. 

National  Bank  of  Commerce  of 
Tacoma,  Wash.,  v.  Tacoma  Mill 
Co.,  88. 

National  Bank  of  Commonwealth 
V.  Mechanics'  Nat.  Bank,  419, 
420. 

National  Bank  of  Fairhaven  v. 
Phoenix   Warehousing  Co.,  271. 

National  Bank  of  Fayette  Co.  v. 
Dushane,  244. 

National  Bank  of  Fishkill  v. 
Speight,  20. 

National  Bank  of  Ft.  Edward  v. 
Washington  County  Nat.  Bank, 
82. 

National  Bank  of  Genesee  v. 
Whitney.  252,  294. 

National  Bank  of  Gloversville  v. 
Johnson,  229,  230,  233,  241,  242. 

National  Bank  of  Madison  v.  Da- 
vis, 242. 

National  Bank  of  Metropolis  v. 
Kennedy.  393,  416,  417,  418. 

National  Bank  of  Newburgh  v. 
Smith.  72. 

National  Bank  of  New  .Jersey  v. 
Berrall,  143.  149. 

National  Bank  of  North  America 
of  Boston  V.  Bangs,  161,  162, 
181. 


GU 


CASES   CITED 
[The  figures  refer  to  pages] 


National  Bank  of  Oshkosh  v. 
Miinger,  3o2. 

National  Bank  of  Railway  v.  Car- 
penter. 244. 

National  Bank  of  Redemption  v. 
Boston.  437.  440.  441. 

National  Bank  of  Republic  v. 
Young.  29o. 

National  Bank  of  Rolla  v.  First 
Nat.  Bank,  161,  166. 

National  Bank  of  Tarentum  v. 
Equitable  Trust  Co.  of  Pitts- 
burg, 321. 

National  Bank  of  the  Metropolis 
V.  Williams,  322. 

National  Bank  of  the  Republic  v. 
Millard,  12,  128. 

National  Bank  of  Virginia  v. 
Nolting,  166. 

National  Butchers'  &  Drovers' 
Bank  v.  Hubbell,  30,  31,  206, 
209. 

National  City  Bank  of  Brooklyn 
V.   Westcott,  167,  173. 

National  Commercial  Bank  v.  Mil- 
ler. 32,  12S,  137.  153. 

National  Dredging  Co.  v.  Presi- 
dent, etc.,  of  Farmers'  Bank,  88, 
157,  160,  166. 

National  Exch.  Bank  v.  Eliot  Nat. 
Bank.   185. 

National  Exch.  Bank  v.  Ginn  & 
Co..  149.  185. 

National  Exch.  Bank  v.  National 
Bank  of  North  America.  59. 

National  Exch.  Bank  of  Albany  v. 
Lester,  170. 

National  Gold  Bank  &  Trust  Co. 
V.  McDonald,  39. 

National  Mahaiwe  Bank  v.  Peck, 
72. 

National  Newark  Banking  Co.  v. 
Second  Nat.  Bank  of  Erie,  111. 

National  I'ahquioque  Bank  v. 
First  Nat.   Bank,  416. 

National  Park  Bank  v.  German- 
American  Mutual  Warehouse  & 
Sefurity  Co.,  293. 


National  Park  Bank  v.   Harmon, 

3S5. 
National  Park  Bank  v.  Ninth  Nat. 

Bank.  161. 
National  Park  Bank  of  New  York 

V.  Seaboard  Bank,  173. 
National     Park     Bank     of     New 

York  V.  Steele  &  Johnson  Mfg. 

Co..  133,  142,  150. 
National  Pemberton  Bank  v.  Poi'- 

ter.  232. 
National  Revere  Bank  of  Boston 

V.    National    Bank   of   Republic 

of  New  York,  215.  217. 
National  State  Bank  v.  Weil,  110. 
National   State  Bank  of  Camden 

v.  Liudeman,  139. 
National    State    Bank   of    Lafay- 
ette V.   Ringel,   78. 
National   Security    Bank    v.   But- 
ler. 347.  423. 
National  Security  Bank  v.  Cush- 

man,  338. 
National    Union    Bank    v.    Earle. 

184. 
Nave  V.  First  Nat.  Bank,  326. 
Nead  v.  Wall.  393. 
Neal  v.  Coburn.  161.  163. 
Neal  v.  First  Nat.  Bank,  88. 
Neely  v.  Rood,  13. 
Neff  V.  Greene  County  Nat.  Bank. 

57. 
Nehawka   Bank   v.    Ingersoll,    68, 

151. 
Neiffer  v.  Bank  of  Knoxville,  313. 
Neill  V.  Rogers  Bros.  Produce  Co., 

253.' 
Neilsville    Bank    v.    Tuthill,    232, 

234. 
Newell  v.  National  Bank  of  Som- 
erset, 238. 
New  Farmers'  Bank's  Trustee  v. 

Cockrell.  358. 
New  Farmers'  Bank's  Trustee  v. 

Young.  71,  74. 
New  Haven  Wire  Co..  In  re,  254. 
New    Hope   &    D.    Bridge   Co.    v. 

Phenix  Bank,  288. 


CASES   CITED 
[The  figures  refer  to  pages] 


G15 


New  Orleans  Xat.  Bank  v.  Ray- 
mond, 252. 

Newport  Nat.  Bank  v.  Board  of 
Education  of  Newport,  2;J2,  27(.). 

Newton  v.  Eagle  &  Plienix  Mfg. 
Co.,  443. 

New  York  v.  Commissioners  of 
Taxes  and  Assessments.  437. 

New  York  v.  Weaver,  436,  439. 

New  York  County  Nat.  Bank  v. 
Massey,  64. 

New  York  Mortg.  Co.  v.  Secretary 
of  State,  273. 

New  York  Produce  Exch.  Bank  v. 
Houston.  88. 

New  York  Produce  Exch.  Bank  v. 
Twelfth  Ward  Bank  of  City  of 
New  York,  163. 

Niagara  County  Bank  v.  Baker, 
230. 

Niblack  v.  Cosier,  344. 

Niblack  v.  Park  Nat.  Bank,  67. 

Niccolls  V.  Rice,  448. 

Nichols  V.  State,  23,  84. 

Nicholson  v.  National  Bank  of 
New  Castle,  231,  233,  240. 

Nicklas  v.  Parker,  4.56,  457. 

>sidig  V.  National  Bank  of  Brook- 
lyn,  114. 

Nieman  v.  Beacon  Trust  Co.,  156. 

Ntfble  V.  Doughteu,  36,  202. 

Noble  State  Bank  v.  Haskell,  8, 
9,  363. 

Nodine  v.  First  Nat.  Bank,  85. 

Nogga  V.  Savings  Bank  of  An- 
sonia,    458. 

Nolting  V.  National  Bank  of  Vir- 
ginia, 50,  67. 

Non-Magnetic  Watch  Co.  of  Amer- 
ica, In  re,  253. 

Nonotuck  Silk  Co.  v.  Flanders. 
207,  209,  358. 

Northampton  Nat.  Bank  v.  Smith. 
149. 

North  Bridgewater  Sav.  Bank  v. 
Soule,  4.50. 

North  Brookfield  Sav.  Bank  v. 
Flanders,  446. 


North  Carolina  Corporation  Com- 
mission V.  Merchants'  &  Farm- 
ers" Bank,  206.    "^ 

Northheld  Nat.  Bank  v.  Arndt,  40.''- 

Northrop  v.  Hale,  457. 

North  Star  Boot  &  Shoe  Co.  v. 
Stebl)ins,  324. 

Northwestern  Coal  Co.  v.  Bow- 
man, 110,  122,  123. 

Northwestern  Nat.  Bank  of  Chi- 
cago v.  Bank  of  Commerce  of 
Kansas  City.  163. 

Norton  v.  Derry  Nat.  Bank,  284, 
286. 

Noi-ton  V.  Jewett.  8. 

Noyes  v.  Institution  for  Sav.  in 
Newburyport.  460. 

Nurse  v.  Satterlee,  206. 

Nutt  v.  Morse.  456. 

Nutting  V.  Burked,  111. 


Oak  Grove  &  Sierra  Verde  Cat- 
tle Co.  V.  Foster,  344. 

Oakland  Bank  of  Savings  v.  Wil- 
cox, 29S. 

Oates  v.  First  Nat.  Bank,  240. 

Oatman  v.  Batavian  Bank.  65. 

O'Brien  v.  East  River  Bridge  Co., 
348. 

O'Brien  v.  Grant,  184.  186,  187. 

Ocean  Park  Bank  v.  Rogers.  39. 

O'Connor  v.  Mechanics'  Bank,  54. 

O'Connor  v.   Witherby,  393. 

Oddie  V.  National  City  Bank  of 
New  York,  38,  39,  150. 

Officer  V.  Officer,  44. 

Offutt  V.  Rucker,  115. 

O'Grady  v.   Stotts  City  Bank,  71. 

Ohio  Valley  Nat.  Bank  v.  Hulitt, 
386. 

Old  Nat.  Bank  v.  German-Amer- 
ican   Nat.    Bank,    ,30.    218,    221, 

Olnistcad  v.  New  England  Mortg. 

Sec.  Co.,  237. 
Olmstead  v.  Winsted  Bank,  260. 


616 


Olney  v.  Cliadsey,  310,  314. 
Oiuaha  Nat.  Bank  v.  Kiper,  200. 
Oneida    Bank    v.    Ontario    Bank, 

295. 
O'Neil  V.  New  England  Trust  Co., 

94.   156. 
Ontario  Bank  v.  Liglitbody,  259. 
Opi>enlieinier  v.  First  Nat.  Bank, 

-,52. 
Ord%vay  v.  Central  Bank  of  Balti- 
more, 245. 
Oregon  &  W.   Trust   Inv.   Co.   v. 

Ratbburn,  5. 
Organized     Charities     Ass'n     v. 

Mansfield,  334. 
Oriental  Bank  v.  Gallo,  172. 
Orme  v.  Baker,  334,  350,  356. 
Osborn  v.  Bank  of  United  States, 

361. 
Osborn  v.  Byrne,  450. 
Osborn  v.   Gheen,  163. 
Otis  V.  Gross,  44. 
Ottaquechee   Sav.   Bank  v.   Holt, 

336. 
Ouderkirk  v.  Central  Nat.   Bank 

of  Troy,  20. 
Oulton  V.  German  Savings  &  Loan 

Soc,  3. 
Overman  v.  Hoboken  City  Bank, 
■  185. 

Owens  V.   Stapp,  83. 
Owensboro  Nat.  Bank  v,  Ownes- 

boro,  435,  436. 
Owsley  V.  Bank  of  Cumberland, 

70. 
Oyster  v.  Short,  74. 


Pacific  Bank  v.  Stone,  314. 
Pacific  Nat.  Bank  v.  Eaton,  372, 

374. 
Pacific  Nat.  Bank  v.  Mixter,  425, 

426,  427. 
Pack  V.  Thomas,  11.5,  117. 
Packer  v.  Crary,  53. 
Padgett    V.     Bank    of    Mountain 

View,  94. 


CASES   CITED 
[The  figures  refer  to  pages] 

Page  County  v.  Rose,  44. 
Palmer   v.    Providence    Inst,    for 

Sav.,  452. 
Palmer  v.  Stephens,  106. 
Pape  v.  Capitol  Bank  of  Topeka, 

230,  232,  268. 
Parke  v.-  Koser,  135,  167. 
Parker  v.  Hartley,  20. 
Parker  v.  Reddick,  122,  123. 
Parker  v.  Robinson,  387. 
Parkersburg  Nat.  Bank  v.  Als,  60. 
Parkman    v.    Suffolk    Sav.    Bank 

for  Seamen,  456. 
Parks  V.  Knickerbocker  Trust  Co., 

46. 
Parsons  v.  Treadwell,  60. 
Patten  v.  American  Nat.  Bank  of 

Denver,  61. 
Patterson  v.  First  Nat.  Bank,  94. 
Patterson  v.   INIarine  Nat.   Bank, 

48.  95,  144,  146. 
Pattison  v.  Syracuse  Nat.  Bank, 

15,  16,  319,  321,  327. 
Paul  V.  Draper,  44. 
Paul  V.  Virginia,  273. 
Pauly  V.  State  Loan  &  Trust  Co., 

384,  385. 
Peabody  v.  Citizens'   State  Bank 

of  St.  Charles,  144. 
Peak  V.  Ellicott,  22,  359. 
Pearce  v.  Dill,  147. 
Pease  v.  Landauer,  129. 
Pease  &  Dwyer  Co.  v.  State  Nat. 

Bank,  1.53. 
Peck  V.  First  Nat.  Bank,  221. 
Peerrot  v.  Mt.  Morris  Bank,  158. 
Pelham   v.  Adams,  61. 
Pelletier  v.  State  Nat.  Bank,  261. 
Pelt  V.  Marlar,  111- 
Pelton  V.  Commercial  Nat.  Bank, 

439. 
Pemigewassett    Bank    v.    Rogers, 

227 
Pendleton  v.  Bank  of  Kentucky, 

298. 
Pendleton  v.  Com.,  13. 
I'euu     Nat.     Bank    v.     Kopitzsch 

Soap  Co.,  118. 


Pennington  v.  Baehr,  lOG. 

Pennsylvania  Title  &  Trust  Co.  v. 
Mey.er,  48,  49. 

People  V.  Backus,  3GS. 

People  V.  Bartow.  0,  0. 

People  V.  Biugluiiuton  Trust  Co., 
443. 

People  V.  Brewster,  5. 

People  V.  City  Bank  of  Rochester, 
22,  206. 

People  V.  Consolidated  Nat.  Bank, 
379. 

I'eople  V.  Gorham,  103. 

People  V.  Kemp,  97. 

People  V.  Loewenthal,  2G8. 

People  V.  Marshall,  268,  272. 

People  V.  Mechanics'  &  Traders' 
Sav.  Inst.  450. 

People  V.  National  Sav.  Bank, 
268. 

People  V.  President,  etc.,  of  Oak- 
land County  Bank,  270,  272. 

People  V.  St.  Nicholas  Bank,  132, 
184.  350,  352. 

People  V.  State  Bank  of  Ft.  Ed- 
ward, 51. 

People  V.  Utica  Ins.  Co.,  8,  9. 

People's  Bank  v.  Franklin  Bank, 
162,  163. 

People's  Bank  v.  Manufacturers' 
Nat.  Bank,  285,  312,  316. 

People's  Bank  of  Wilkes-Barre  v. 
Legrand,  72. 

People's  Nat.  Bank  v.  Board  of 
Com'rs  of  Kingfisher  County, 
367. 

People's  Savings  Bank  &  Trust 
Co.  V.  Lacey,  152. 

People's  State  Bank  of  Lakota  v. 
Francis,  417. 

People's  Trust  Co.  v.  Pahst,  227. 

Percival  v.  Frempton.  210. 

Percy  v.  Millaudon,  310. 

Perkins  v.  Smith,  226. 

Perth  Amboy  Gaslight  Co.  v.  Mid- 
dlesex County  Bank.  37,  .3,50, 
359. 


CASES   CITED  617 

[The  figures  refer  to  pages] 

Peter   Adams   &  Co.   v.   National 

Shoe  &  Leather  Co.,  50. 
Peters  v.  Bain,  355. 
Peters'  Shoe  Co.  rr^urray,  206. 
Peterson  v.  Union  Nat.  I'.ank,  3ft. 
Petri  V.   Commercial   Nat.    Bank, 

431.  433. 
Philadelphia  Nat.  Bank  v.  Dowd, 

208. 
Philler  V.  Jewott,  188. 
I'hiller  v.  Patterson.  178,  187,  188. 
Phillips  V.  Blake,  258. 
Phillips  V.  Mercantile  Nat.  Bank, 

174. 
Phinney  v.  State,  154. 
Phipps  V.  President,  etc.,  of  Mill- 
bury  Bank,  197. 
Phoenix  Nat.  Bank  v.  Taylor,  160. 
Phryse  v.  Farmers'  Bank  of  Beat- 

tjnuUe.  299. 
Pickaway  County  Bank  v.  Prath- 

er,  273. 
Pickett  V.  Merchants'  Nat.  Bank 

of  Memphis,  244,  245. 
Pickle  V.  Muse,  139. 
Pierce  v.  Insdeth,  199. 
Pindall's    Ex'rs    v.    Northwestern 

Bank,  258. 
Pinkney  v.  Kanawha  Valley  Bank, 

195,   196. 
Pittman,  Ex  parte,  8. 
Pittsburgh     Locomotive     &     Car 

Works   V.    State  Nat.   Bank   of 

Keokuk,  248. 
Plankinton  Bank,  In  re,  43. 
Piano  Mfg.  Co.  v.  Auld,  207,  357. 
Planters'  Bank  v.  Keesee,  98. 
Planters'  Bank  v.  Sharp,  234. 
Planters'  Bank  of  Prince  George's 

County  V.  Farmers'  &  Mechan- 
ics' Bank  of  Georgetown,  92. 
Planters'   &   Merchants'   Bank   v. 

Goetter,  230. 
Piatt,  In  re,  417. 
Piatt  V.  Beebe,  418. 
Plover  Sav.  Bank  v.  Moodie.  Ill, 

113.  123.  124. 


618 


CASES   CITED 
[The  figures  refer  to  pages] 


roess  V.  Twelfth  Ward  Bauk  of 

City  of  ^'e^v  York,  125,  132. 
Pollard  V.  Bank  of  England,  149. 
Pollard  V.  Bowen,  116,  118. 
Pollard  V.  Wellford,  90. 
Polley  V.  Hicks,  458. 
Pope  V.  Bank  of  Albion.  141,  142, 

321. 
Pope    v.    Burlington    Sav.    Bank, 

457. 
Poppleton  V.  Wallace,  395. 
Pott  V.  Clegg,  92. 
Potter  V.  Bank  of  Ithaca,  270. 
Potter  V.  Merchants'  Bank  of  Al- 
bany, 322. 
Potter  V.  U.  S.,  406. 
Power  V.    First    Nat.    Bank,   215, 

217. 
Pratt  V.   Short.  445. 
Pratt  V.  Union  Nat.  Bank,  91. 
Prescott  V.  Haughey,  399. 
Prescott  Nat.   Bank  of  Lowell  v. 

Butler,  2.32,  234. 
President,    etc.,    of    Agricultural 

Bank  v.  Bissell,  238. 
President,  etc.,  of  Bank  of  Utica 

V.  Sniedes,  197. 
President,  etc.,  of  Cabot  Bauk  v. 

Morton.   2.35. 
President,     etc..     of     Commercial 

Bank  v.  French,  326. 
President,   etc.,    of   Dorchester  & 

Milton  Bank  v.  President,  etc., 

of  New  England^  Bank.  216,  219. 
President,     etc.,     of     Gloucester 

Bank     v.     President,     etc.,     of 

Salem  Bank,  2.59. 
President,    etc.,    of    Hallowell    & 

Augusta  Bank  v.  Howard,  260. 
President,    etc.,    of    Maine    Bank 

V.  Butts,  238. 
President,  etc.,  of  Manhattan  Co. 

V.  Lydig,  24,  26. 
President,  etc..  of  Neponset  Bank 

V.  Leland,  211. 
President,  etc.,  of  Niagara  Bank 

V.  Rosevelt,  259. 


President,    etc.,    of    Northampton 

Bank  v.  Pepoon,  .309.  311. 
President,  etc.,  of  Planters'  Bank 

of  Mississippi  v.  Sharp,  238. 
President,  etc.,  of  Portland  Bank 

V.   Storer,  237. 
President,  etc.,  of  Salem  Bank  v. 

President,    etc.,    of    Gloucester 

Bank.  329. 
President,  etc.,  of  State  Bank  v. 

Armstrong,  62. 
President,  etc.,  of  State  Bank  v. 

Kain,  321. 
President,  etc.,  of  State  Bank  of 

Illinois  V.  Aresten,  264. 
President,  etc..  of  Union  Bank  v. 

Knapp.  26,  93. 
President,     etc.,     of     Washington 

Bank  v.  Lewis,  340. 
President,  etc.,  of  Western  Bank 

V.  Mills,  227. 
Preston    v.     Canadian    Bank    of 

Commerce,  182. 
Preston  v.  Cutter,  32^. 
Preston  v.  Marquette  County  Sav. 

Bank,  277. 
Preston  v.  Prather,  15,  17,  18,  19. 
Price  V.  Abbott.  415. 
Price  V.  Coleman,  423. 
Price  V.  Neal,  150,  162.  163,  164, 

165.  166. 
Price  V.  Yates,  393,  417. 
Prideaux  v.  Griddle,  110,  113. 
Pritchard  v.  Barnes,  412. 
Protor  V.  Greene,  53. 
Providence  Inst,  for  Sav.  v.  Car- 
penter, 461. 
Providence  Inst,  for  Sav.  v.  Taft, 

459. 
Prudential     Trust     Co.'s     Assign- 
ment, In  re,  13. 
Pullen    v.    Placer    County    Bank, 

1.54. 
Pullman   Palace  Car  Co.  v.  Cen- 
tral   Transp.    Co.,    294. 
Purcell  V.  AUemong,  116,  117. 


CASES  CITED 
[The  figures  refer  to  pages] 


G19 


rursifull  V.  rinoville  Bankiug  Cu. 

72. 
Pntiiaiu   V.  U.   S.,  ."JIT. 


Quattrochi  v.  Fanners'  &  Mer- 
chants' Bank,  2(5,  92. 

Queenau  v.  Palmer,  444. 

Queen  City  Sav.  Bank  &  Trust 
Co.  V.  Reyburu,  40. 

Quin  V.  Earle,  350,  355. 

R 

Kaesser  v.  National  Exch.  Bank, 

153. 
Kailey  v.  Bacon,  259. 
Ramsdale  v.  Hortou,  258. 
Randall  v.  Way,  55. 
Randolph  v.  Allen,  48. 
Randolph  Nat.  Bank  v.  Hornblow- 

er,  137. 
Rankin  v.  Barton,  432. 
Rankin  v.  Chase  Nat.  Bank,  320. 
Rankin  v.  City  Nat.  Bank  of  Kan- 
sas City,  316. 
Rankin  v.  Cooper,  302,  403. 
Rankin  v.  Fidelity   Ins.   Trust  & 

Safe  Deposit  Co.,  ;5S5. 
Rapp  V.  National  Security  Bank, 

•^. 
Raymond  v.  Baar,  258. 
Raymond  v.  Palmer,  70. 
R.     C.     Neeiy    Co.    v.    Bank    of 

WayneSbcro,  54. 
Read  v.  Marine  Bank  of  Buffalo, 

76. 
Reapers'  Bank  v.  Willard.  268. 
Receiver  of  Middle  District  Bank. 

In  re,  259,  353. 
Rector  v.  City  Deposit  Bank  Co.. 

178,  186. 
Rector  v.  Commercial  Nat.  Bank, 

186. 
Redington  v.  Woods,  167. 
Reed  v.  Home  Sav.  Bank,  448. 


Reed  v.  Mattapan  Deposit  i&  Trust 
Co.,  lo:;,  1.55. 

Reed  v.  I'eople,  2,  3,  4'^3. 

Reed  v.  Roark,  tffST 

Reeves  v.  Pierce,  359. 

Reeves  v.  State  Bank  of  Ohio, 
215,  218. 

Reno  v.  James,  313. 

Republic  Life  Ins.  Co.  v.  Hudson 
Trust  Co.,  51,  148. 

Reynes  v.  Dumont,  211. 

Reynolds  v.  First  Nat.  Rank,  252, 
282. 

Reynolds  v.  St.  Paul  Trust  Co., 
51. 

Reynolds  v.  Simpson,  276. 

R.  II.  Herron  Co.  v.  Mawby,  113. 

Rhinehart  v.  New  Madrid  Bank- 
ing Co.,  44. 

Rice  V.  Bank  of  Camas  Prairie, 
57. 

Rice  V.  Citizens'  Nat.  Bank.  171. 

Rice  V.  Third  Nat.  Bank,  55. 

Richards  v.  Attelborough  Nat. 
Bank.  368,  397.  412. 

Richardson  v.  Denegre,  208,  351. 

Richardson  v.  Louisville  Banking 
Co..  419. 

Richardson  v.  New  Orleans  Cof- 
fee Co.,  356. 

Richardson  v.  New  Orleans  De- 
benture Redemption  Co.,  350, 
356. 

Richardson  v.  Olivier,  3-52,  3.56. 

Richardson  v.  U.  S.,  411. 

Richeson  v.  National  Bank  of 
Mena,  228. 

Richmond  v.  Irons,  61.  382,  387, 
3SS.  389.  395,  412,  420. 

Richmond  Bank  v.  Robinson,  227. 

Rickey,  Ex  parte,  313. 

Ridden  v.  Thrall,  4,58. 

Riddle  v.  First  Nat.  Bank,  79,  81, 
416. 

Ridgely  Nat.  Bank  v.  Patton,  59. 

Ridgway  v.  Farmers'  Bank  of 
Bucks  County,  311. 


(i20 


Kioger  v.  U.  S.,  409. 

Kingling  v.  Koliu,  283. 

Rio  State  Bank  v.  Amondson,  300. 

Ripley  Nat.  Bauk  v.  Latimer,  114. 

Risley  v.  Plieuix  Bank  of  City  of 

New  York,  52,  53. 
Ritenour  v.  Harrison,  2.36. 
Riverside    Bauk     v.     First     Nat. 

Bauk,  58,  142,  149. 
Robards  v.  Hamrick,  49. 
Robarts  v.  Tucker,  58. 
Robb  V.  Pennsylvania  Co.  for  Ins. 

on  Lives  &  Granting  Annuities, 

160. 
Roberts  v,  Corbin,  129. 
Roberts  v.  Hill,  423. 
Robertson  v.  Buffalo  County  Nat. 

Bank,  288. 
Robertson  v.  Coleman,  175. 
Robinson  v.  Aird.  347,  448. 
Robinson  v.  Bauk  of  Darien.  264. 
Robinson  v.  Hall.  304,  397. 
Robinson  v.  HaAvksford,  108, 
Robinson  v.  Reynolds,  255. 
Robinson  v.  Ring,  457. 
Robinson  v.  Southern  Nat.  Bank, 

.385. 
Robison  v.  Beall,  279. 
Rock   River    Bank    v.    Sherwood, 

236. 
Rockwell  V.  Fanners'  Nat.  Bank, 

241. 
Rodgers  v.  Baker,  106. 
Roe  V.  Bank  of  Versailles,  312. 
Roebliug  v.  First  Nat.  Bank,  281. 
Rog;ers  v.  'Durant,  97. 
Rolin  V.   Steward,  144,  145. 
Rome  Sav.  Bank  v.  Krug,  228. 
Rosenblatt  v.  Haberman,  112. 
Rosenblatt  v.  Johnston,  436. 
Ross  V.  Bank  of  Burlington,  263. 
Ross  V.  Saron,  118. 
Rothschild  v.  Corney,  126. 
PtOthschild  V.  Currie,  199. 
Rounds  V.  Smith,  137. 
Rouquette  v.  Overmann,  199. 
Rouvant    v.     San    Antonio    Nat. 

Bank,  162. 


CASES,  CITED 
[The  figures  refer  to  pages] 

Royal  Bank  v.  Tottenham,  40, 102. 

Russell  v.  Hadduck,  210. 

Russell  v.  Washington  Sav.  Bank, 

314. 
Ryan  v.  Dunlap,  324. 
Ryan  v.  Raj',  447,  44S. 


Safe  Deposit  &  Trust  Co.  v.  Dia- 
mond Nat.  Bank,  46. 

St.  Joseph  Fire  &  Marine  Ins.  Co. 
v.  Hauck,  227. 

St.  Louis  Brewing  Ass'n  v.  Aus- 
tin, 358. 

St.  Louis  Southwestern  R.  Co.  v. 
James,  140. 

St.  Louis  &  S.  F.  R.  Co.  v.  John- 
ston, 35,  36,  209,  350. 

St.  Nicholas  Bank  of  New  York 
v.  State  Nat.  Bank,  215,  217. 

St.  Paul  Nat.  Bank  v.  Cannon, 
191. 

St.  Paul  &  M.  Trust  Co.  v.  Jeuks, 
249,  279. 

St.  Regis  Paper  Co.  v.  Tona- 
wanda  Co.,  138. 

Salladin  v.  Mitchell,  3.53. 

Salmon,  In  re,  13. 

Salmon  Falls  Bank  v.  Leyser,  232, 
236.  • 

Salomon  v.  State  Bauk,  173. 

Salter  v.  Burt,  102. 

Salt  Springs  Bauk  v.  Syracuse 
Sav.  Inst..  161. 

Samples  v.  Bank,  263. 

Samuel  Wilde's  Sons,  In  re,  226. 

Sanbouru  v.  Smith,  80. 

San  Diego  County  v.  California 
Nat.  Bank,  45,  3.58. 

San  Francisco  Nat.  Bank  v.  Amer- 
ican Nat.  Bank  of  Los  Angeles, 
214,  219. 

San  Francisco  Nat.  Bank  v.  Dodge, 
439. 

San  Joaquin  Val.  Bank  v.  Bours, 
298. 


CASES   CITKD 


[The  figures  re 

Savannah  Bank   &   Trust   Co.   v. 

~    Hartrid^e,  '.V20. 

Savings  Bank  of  Baltimore  v. 
McCarthy,  51. 

Savings  Bank  of  Cincinnati  v. 
Benton,  314. 

Savings  Bank  of  Louisville's  As- 
signees V.  Capertou,  298. 

Savings  Bank  of  New  London  v. 
iSew  London,  444. 

Savings  Bank  of  San  Diego  Coun- 
ty V.  Burns,  227. 

Sayles  v.  Cox,  203,  201). 

Sayre  v.  Weil,  46,  67. 

S.  Blaisdell,  Jr.,  Co.  v.  Citizens' 
Nat.  Bank,  255. 

Scanlon-Gipson  Lumber  Co.  v. 
Germania  Bank,  88,  160. 

Schaffner  v.  Ehrman,  145. 

Schallenberger  v.  First  State 
Bank  of  Holstein,  Neb.,  363. 

Schalucky  v.  Field,  93. 

Schierenberg  v.  Stephens,  370. 

Schinotti  v.   Whitney,  92. 

Schippers   v.   Kempkes,   448,  461. 

Schleisiuger  v.  Kelly,  246. 

Scbleisuger  v.  Lehmaier,  246. 

Schlesinger  v.  Gilhooly,  246. 

Schneider  v.  Irving  Bank,  153. 

Schneitman  v.  Noble,  322. 

Schofleld  V.  Goodrich  Bros.  Bank- 
ing Co.,  278. 

Schofield  V.  State  Nat.  Bank,  232. 

Schofleld  V.  Twining,  389. 

Schofield  Mfg.  Co.  v.  Cochran,  23. 

Scholfield  V.  Earl  of  Loundesbor- 
ough,  170. 

Schollmier  v.  Schoendelen,  52, 
459. 

School  Dist.  No.  57  of  Logan 
County  V.  Eager,  110. 

Schoonover  v.  Osborne,  86. 

Sehrader  v.  Manufacturers'  Nat. 
Bank.  ,396.  412. 

Schroeder  v.   Central   Bank,   128. 

Schuler  v.  Israel,  64,  65. 

Schuler  v.  Laclede  Bank,  62. 


621 

fer  to  pages] 

Scliulter  V.  Bowery  Sav.  Bank,  55. 
Schuyler    Nat.    Bank    v.    BoUong, 

24;],  245. 
Schuyler   Nat.   BanlT^v.   Gadsden, 

244. 
Schwartz  v.  State   liank,  27. 
Scott   V.  Armstrong,   65,   74,   349, 

417,  423,  424,   429. 
Scott   V,    Berkshire   County    Sav- 
ings Bank,  51,  456,  458. 
Scott  V.  Deweese,  371,  384. 
Scott  V.  Franklin,  210. 
Scott  V.  Gilkey,  202. 
Scott  V.  Latimer,  375. 
Scott  V.  National  Bank  of  Chester 

Valley,  17,  IS. 
Scott  V.   Pequonnock   Nat.   Bank, 

364,  376. 
Scott  V.  U.  S.,  411. 
Scroggin  v.  McClelland,  119. 
Scruggs  V.  Gass.  259. 
Scudder  v.  Trenton  Savings-Fund 

Soc,  47. 
Searles  v.  Smith  Grain  Co.,  254. 
Seattle,  The,  228. 
Second  Nat.  Bank  v.  Averell,  25, 

328. 
Second  Nat.    Bank   v.   Burt,   298, 

299. 
Second  Nat.  Bank  v.  Fitzpatrick. 

243. 
Second  Nat.  Bank  v  Howe,  3.34. 
Second  Nat.   Bank  v.  Merchants' 

Nat.  Bank,  216,  219. 
Second  Nat.  Bank  of  Baltimore  v. 

Western    Nat.    Bank    of    Balti- 
more, 142. 
Second  Nat.   Bank  of  Cincinnati 

V.   Hemingray,   73. 
Second  Nat.  Bank  of  Columbia  v. 

Cummings,  202.  204,  216. 
Second  Nat.   Bank  of  Detroit  v. 

Williams,  153. 
Second  ^'at.   Bank   of   Lafayette 

V.  Hill,  72. 
Second  Nat.  Bank  of  New  Albany 

V.  Gibboney.  38.  47,  94,  148. 


022 


CASES   CITED 
[The  figures  refer  to  pages] 


Second  Nat.  Bauk  of  Pittsburg  v. 

Guarautee    Trust    &    Safe    De- 
posit Co.,  172. 
Security    Bank    of    Minnesota   v. 

Luttgen.  204,  253. 
Security    Bank    of    Minnesota    v. 

Northwestern  Fuel  Co..  32,  36. 
Security    Bank    of    Minnesota    v. 

Petruschlve.  40. 
Security   Bauk    of    New   York   v. 

National  Bank  of  the  Republic, 

135. 
Security  Nat.  Bank  v.  St.  Croix 

Power  Co.,  291. 
Security   Sav.   Bank   of  Wellman 

V.  Smith,  323,  324. 
Seeber  v.  Commercial  Nat.  Bank, 

286,  291. 
Seeberger  v.  McCormick.  431. 
Seeley  v.   New  York   Nat.   Exch. 

Bank,  372. 
Seligman    v.    Charlottesville   Nat. 

Bank,  284. 
Seneca    County    Bank    v.    Lamb, 

238. 
Serle  v.  Nortou.  108. 
Seven  Corners  Bank.  In  re,  200. 
Seventh  Nat.  Bauk  v.  Cook,  138. 
Sewell  V.  Burdick.  2-54. 
Seybold    v.     Grand    Forks    Nat. 

Bauk,  32. 
.'Shaffer  v.  Rhynders,  252. 
Shallenberger  v.  First  State  Bank 

of  Holstein,  Neb.,  9. 
Shank  v.  Butsch.  106. 
Sharp  V.  Citizens'  Bauk  of  Stan- 
ton, 81. 
Shaw  V.  Clark.  337. 
Shaw  V.   National  German-Amer- 
ican Bank,  278. 
.^hawumt  Nat.   Bank  y.  Manson, 

40,  125. 
Shawnee  Nat.  Bank  v.  Wooten  & 

Potts,  70. 
Sheedy  v.  Roach,  458. 
Shelby's  Ex'rs  v.  Shelby,  55. 


Shepard  v.  Meridian  Nat.  Bank, 

68. 
Sheren  v.  Meudenhall,  443. 
Sherman  v.  Comstock.  118. 
Sherman    v.    New    Bedford    Five 

Cents  Sav.  Bank,  456. 
Sherry    v.    Denn    ex    dem.    State 

Bank  of  Indiana.  280. 
Sherwood    v.'   Central    Michigaii 

Sav.   Bank,  356. 
Sherwood  v.  Home  Sav.  Bank,  16, 

19.  321. 
Shields  v.  Thomas,  358. 
Shipman  v.  Bank  of  State  of  New 

York,  90,   174. 
Shipsey  v.  Bowery  Nat.  Bank.  219. 
Shoe  Lasting   Maeh.   Co.   of  New 

York    V.    Western    Nat.    Bank, 

157. 
Shoemaker   v.    National    Mechan- 
ics' Bank,  249. 
Shopert  v.  Indiana  Nat.  Bank,  22, 

359. 
Short  V.  Hepburn,  4-32. 
Showalter  v.  Cox,  209,  351. 
Shults,  In  re,  74. 
Shultz  V.  Depuy,  118. 
Shunk  V.  First  Nat.  Bank.  242. 
Shute   V.    Pacific   Nat.    Bank,   78, 

81.  260. 
Sickles  V.  Herold,  61,  92. 
Siegel  V.  State  Bank,  451. 
Sill    V.    Bank    of    United    States, 

264. 
Silsbee    State    Bank    v.     French 

Market  Grocery  Co.,  48,  53. 
Silver  Lake  Bank  v.   North,  251, 

273. 
Simmons  v.  Almy.  54. 
Simmons  Hardware  Co.  v.  Bank 

of  Greenwood,  129. 
Simms  v.  Clark,  258. 
Simonds  v.  Black  River  Ins.  Co., 

116. 
Simonton  v.  Lanier.  236. 
Simpson  v.  Waldby,  215,  217. 


CASES   CITED 
[The  flgures  refer  to  pages] 


623 


Simpson  v.  Wliito,  200. 

Sims  V.   Americuu   Nut.   Hank  of 
Ft.  Smith,  139. 

Siucluir  v.  IMercy,  200. 

Singer  Mfj;.  Co.  v.  Sunuuers,  127. 

Sioux  Oity  Stockyarils  Co.  v.  Fri- 
bourg,  859. 

Sioux   Falls    Nat.    Bank   v.    First 
Nat.  Bank.  29:5. 

Sistare  v.  Boot,  445. 

Skiles  V.  Houston,  73. 

Skillman  v.  Titus.  101.  126. 

Slade  V.  Bennett.  24G. 

Slattery  v.  North  End  Sav.  Bank, 
447. 

Smiloy  v.  Fry,  81. 

Smith  V.  Board  of   Chosen   Free- 
holders of  Essex  County,  50, 

Smith  V.  I'.rooklyn  Sav.  Bank,  452. 
Bryan.  268. 
Des  Moines  Nat.  Bank, 


Smith 
Smith 

69. 
Smith 
Smith 
Smith 

burg 
Smith 
Smith 
Smith 
Smith 
Smith 
Smith 
Smith 
Smith 

Sav. 
Smith 
Snow  V 
Snyder 


Eighth  Ward  Bank,  65. 

Essex  County  Bank,  191. 

Exchange  Bank  of  Pitts- 

.32,  233,  236,  243. 

Field,  142. 

First  Nat.  Bank,  IS. 

Janes,  110.  123. 

Lawson,   314. 

Mercer,  161. 

Miller,  110. 

Mosby,  353. 

Ossipee  Val.  Ten  Cents 
Bank,   458. 

V.  Sanborn  State  Bank,  68. 
Perkins,  199. 
^  Corn  Exch.  Nat.  Bank, 


103,  151,  171,  174. 
Snyder  v.  Foster,  389. 
Solomon  v.  Bates,  306. 
Solomons    v.    Bank    of    England, 

260. 
Southern  Hardware  &  Supply  Co. 

v.  Lester,  151. 
South  Park  Foundry  &  Mach.  Co. 

V.    Chicago    Great   Western   R. 

Co.,  34. 


Sowles  V.  Witters,  394. 
Spaftord  v.  First  Nat.  Bank,  248. 
Sparrow  v.  State  Exch.  Bank,  69. 
Siieckert   v.    GermaH^Nut.    Bank, 

433. 
Spering's  Appeal.  301. 
Si)ink  &  Keyes  Drug  Co.  v.  Ryan 

Drug  Co.,  115,  118. 
Spokane    County    v.    First    Nat. 

Bank,  357. 
Spokane  &  l^astern  Trust  Co.  v. 

Huff,  149,  150. 


Spongberg    v. 

;'.25. 
Spring    Brook 
.  Dunn,  351. 
Spurr  V.  U.  'S., 


First    Nat.    Bank, 


Chemical    Co.    v. 


406. 


Stacy  V.  Dane  County  Bank,  198, 

216. 
Stadler  v.  First  Nat.  Bank,  74. 
Stamford  Bank  v.  Benedict,  311. 
Stanton  v.  Wilkeson,  418. 
Stapylton  v.   Cie  des  Phosphates 

de  France,  38. 
Stapylton  v.  Stockton,  424. 
Stapylton  v.  Thaggerd,  436. 
Star  Fire  Ins.  Co.  v.  New  Hami)- 

shire   Nat.    Bank,    172. 
Stark  V.  United  States  Nat.  I:5ank. 

223. 
Starkweather    v.    Emerson    Mfg. 

Co.,   149. 
Starr  v.  Stiles,  93. 

v.  Tupper.  123. 
V.  J^tua   Banking  &  Trust 
273. 

V.  Ashley,  272. 
V.  Bank  of  Louisiana,  309. 
V.  Brobston,  73. 
V.  Caldwell.  346. 
State  V.  Corning  State  Sav.  Bank. 

44,  68,  446. 
State  V.  Dickerson.    23. 
State  V.  Engle,  272. 
State  V.  First    Nat.     Bank,    287, 

363. 
aState  V.  Foster,  44,  356,  358. 
State  V.  Helmes,  8. 


Start 
State 
Co., 
State 
State 
State 
State 


G24 


CASES   CITED 
[The  figures  refer  to  pages] 


Savings    & 


State    V.    Hibernian 

Loan  Ass'n.  268. 
State  V.  Jackson,  82. 
State  V.  Lincoln  Sav.  Bank.  443. 
State  V.  Midland  State  Bank,  44, 

359. 
State  V.  Myers,  346. 
State  V.  National  Bank  of  Balti- 
more, 366. 
^tate  V.  President,  etc.,  of  Bank 

of  Tennessee,  262. 
State  V.  Richcreek,  8. 
State  V.  Scougal,  5.  9. 
State  V.  Southern  Bank,  206. 
State  V.   State   Bank  of  Wahoo, 

359. 
State  V.  Stebbins.   9. 
State  V.  Struble.  9. 
State  V.  Thum,  44. 
State  V.  Union  Stock  Yards  State 

Bank,  5. 
State  V.  Williams,  9. 
State  V.  Woodmansee,  9. 
State  Bank,  In  re,  31,  32,  33,  34, 

214. 
State  Bank  v.  Byrne,  203. 
State  Bank  v.  Clark,  84. 
State  Bank  v.  Fearing.  235. 
State  Bank  v.  Van  Horn.  262. 
State  Bank  v.  Weiss.   139. 
State   Bank  of   Chicago   v.   First 

Nat.  Bank,  161. 
State  Bank  of  Gothenburg  v.  Car- 
roll, l22. 
State    Bank    of    Iowa    Falls    v. 

Hawkeye    Gold    Dredging    Co., 

50. 
State  Bank  of  Moore  v.  Forsyth, 

324,  338. 
State   Bank   of   Pike   v.    People's 

Nat.  Bank  of  Franklinville,  322. 
State  Bank   of    St.    John   v.    Mc- 

Cabe,  67. 
State  Bank  of  Troy  v.  Bank   of 

the  Capitol,  197. 
State  Bldg.  &  Sav.  Ass'n  v.  jNIe- 

chanics'    Sav.    Bank    &    Trust 

Co.,  21,  23. 


State  Nat.  Bank  v.  Newton  Nat 
Bank,  325. 

State  Nat.  Bank  v.  Reilly,  45. 

State  Nat.  Bank  of  Ft.  Worth  v. 
Thomas  Mfg.  Co.,  215. 

State  of  Tennessee  v.  Davis,  325. 

State  Sav.  Bank  of  Ionia  v.  Mont- 
gomery, 331,  340. 

State  Sav.  Loan  &  Trust  Co.  v. 
Stewart,  314. 

State  Security  Bank  v.  Hoskins, 
280. 

Stearns  v.  Lawrence,  300. 

Stebbins  v.  Lardner,  334. 

Steelman  v.  Atchley,  74,  353. 

Steinki  v.  Yetzer,  315. 

Stephens  v.  Follett,  383. 

Stephens  v.  Monongahela  Nat. 
Bank,  244.  284,  411. 

Stephens  v.  Overstolz,  404. 

Sterling  v.  Marietta  &  S.  Trad- 
ing Co.,  25. 

Stevens  v.  Hill,  309,  311. 

Stewart  v.  Smith,  108,  115. 

Stewart  v.  State,  20. 

Stewart  v.  Wright,  3.32. 

Stilson  V.  First  State  Bank  of 
Corwith,  359. 

Stockman,  Ex  parte,  00,  61. 

Stockton  v.  Mechanics'  &  Labor- 
ers" Sav.  Bank,  450. 

Stoller  V.  Coates,  359. 

Stolze  V.  Bank  of  Minnesota,  65. 

Stone  V.  Demarest,  58. 

Stone  V.  Dodge,  74. 

Stone  V.  Jenison,  348,  423. 

Stone  V.  Rottman,  301,  306. 

Stout  V.  Ennis  Nat.  Bank,  244, 
245. 

Straus  V.  Tradesman's  Nat.  Bank 
of  New  York,  68. 

Streissguth  v.  National  German- 
American  Bank,  215. 

Stribbling  v.  Bank  of  Valley,  236. 

Stuart  V.  Hayden,  .891. 

Studebaker  v.  Perry,  394. 

Stufflebeam  v.  De  Lashmutt,  375. 


CASES   CITED 
[The  figures  refer  to  pages] 


625 


Sturdevant  Bros.  &  Go.  v.  Far- 
mers' &  Merchants'  Bank  of 
Rushville,  285,  280,  323. 

Stuyvesant  Bank  v.  National  Me- 
chanics' Bank,  185. 

Suffolk  Bank  v.  Lincoln  Bank, 
259. 

Sullivan  v.  Lewiston  Inst,  for 
Savings,  452. 

Sunrterlin  v.  Mecosta  County  Sav. 
Bank.  358. 

Supple  V.  Suffolk  Sav.  Bank  for 
Seamen,  456. 

Sutcliffe  V.  McDowell,  117. 

Sutherland  v.  First  Nat.  Bank, 
192. 

Suydam  v.  Morris  Canal  &  Bank- 
ing Co.,  273. 

Svendsen  v.  State  Bank  of  Du- 
luth,  144. 

Sweeney  v,  Easter,  30,  222. 

Sweetser  v.  People's  Bank  of  Min- 
neapolis, 65. 

Swentzel  v.  Penn  Bank,  301. 

Swift,  In  re,  356,  357. 

Swift  v.  Williams,  45. 

Syer  v.  Sebrell,  353. 

Sykes  v.  Holloway,  390. 

Syraonds  v.  Riley,  102,  120,  125. 


Taft  V.  Quinsigamond  Nat.  Bank, 

13,  33,  34,  35,  232. 
Talbot  V.  First    Nat.    Bank,    83, 

243. 
Talbot  V.  Sioux  Nat.  Bank,  431. 
Talbott    V.    Silver    Bow    County, 

436,  440. 

Talcott  V.  First  Nat.  Bank,  26,  92. 

Talmage  v.  Pell.  277. 

Talman  v.  Rochester  City  Bank, 

280.    285. 
Tappan  v.  Merchants'  Nat.  Bank, 

437,  438. 

Tate  v.  Bates,  306. 
Tate  V.  Hilbert,  154. 

TirF.BKS.&  B. — 40 


Taylor  v.  Bruen,  273. 
Taylor  v.  Commercial  Bank,  .3.30. 
Taylor  v.  Coriell.  J^Q,  461. 
Taylor  v.  Empire  State  Sav.  Bank, 

440. 
Taylor   v.   Miami   Exporting   Co., 

279. 
Taylor  v.  Thomas,  399. 
T.    B.    Clark   Co.    v.    Mt.    Morris 

Bank,  145. 
Terrell  v.  Branch  Bank  at  Mobile, 

24,  341. 
Terry  v.  Sisson,  55. 
Teutonia  Nat.  Bank  v.  Loeb,  211. 
Thatcher  v.  Bank  of  State  of  New 

York,  15,  24,  25,  327. 
Thilmany  v.  Iowa  Paper  Bag  Co., 

284. 
Third  Nat.  Bank  v.  Allen.  2.59. 
Third  Nat.  Bank  v.  Boyd.  I'O,  248. 
Third  Nat.  Bank  v.  Buffalo  Ger- 
man Ins.  Co..  378. 
Third  Nat.  Bank  v.  Harrison.  341. 
Third  Nat.  Bank  v.  Hays,  2.53. 
Third  Nat.  Bank  v.  Ober.  145. 
Third  Nat.  Bank  v.  Shoeman.  248. 
Third  Nat.  Bank  v.  Stone.  436. 
Third    Nat.    Bank    v.    Vicksburg 

Bank,  216. 
Thom  V.  Sinsheimer,  117. 
Thomas    v.    City    Nat.    Bank    of 

Hastings,   285,  316. 
Thomas    v.    Exchange    Bank    of 

Angus,  65,  67. 
Thomas    v.    International    Bank, 

83.- 
Thomas  v.  President,  etc.,  of  Far- 
mers' Bank  of  Maryland,  306. 
Thomas  v.  Todd,  258. 
Thomas'  Adm'r  v.  Lewis.  458. 
Thomaston     Bank    v.     Stimpson, 

280. 
Thompson    v.    Bank   of    State   of 

South  Carolina.  109. 
Thompson    v.    German    Ins.    Co., 

894. 
Thompson  v.   Giles,  34. 


626 


CASES   CITED 
[The  figures  refer  to  pages] 


Thompson  v.  Gloucester  City  Sav. 

Inst..  207. 
Thompson  v.  Greeley,  447. 
Thompson  v.  Mecosta,  335. 
Thompson  v.  Riggs,  60. 
Thompson  v.  Saiut  Nicholas  Nat. 

Bank,   140,  295. 
Thompson    v.    Sioux    Falls    Nat 

Bank,  40. 
Thompson  v.  Union  Trust  Co.,  74. 
Thuemmler  v.  Barth,  358. 
Thurston    v.    Wolfborough    Bank. 

262. 
Thweatt  v.  Bank  of  Hopkinsville. 

280. 
Tibby    Bros.    Glass    Co.    v.    Far- 
mers'   &    Mechanics'    Bank    of 
.  Sharpsburg,  128.  171. 
Ticouic  Bank  v.  Johnson,  72. 
Tierman's  Ex'r  v.  Security  Build- 
ing &  Loan  Ass'n,  359. 
Tiffany  v.  National  Bank  of  Mis- 
souri. 240,  241,  362. 
Timbel  v.  Garfield  Nat.  Bank,  170. 
Timberlake   v.    First    Nat.    Bank, 

237. 
Times  Square  Automobile  Co.  v. 
Rutherford  Nat.  Bank.  133,  138. 
Tinkham  v.  Hey  worth,  206. 
Tishimingo  Sav.  Inst.  v.  Buchan- 
an, 2.36. 
Title   Guarantee  &   Trust   Co.   v. 

Haven,  161,  166. 
Titus  V.  :Mechanics'  Nat.  Bank  of 

Trenton,  38.  194.  215. 
Tobey     v.     Manufacturers'     Nat. 

Baiik,  67. 
Tobias  v.  Morris,  91,  156. 
Tobin  V.  McKinney,  81. 
Todd  V.  Neal's  Adm'r,  199. 
Tolerton  &  Stetson  Co,  v.  Anglo- 
California  Bank,  254. 
Tolman  v.  American  Nat.   Bank, 

176. 
Tomliuson    v.    National    German 

American  Bank,  137. 
Tootle  V.  First  Nat.  Bank,  291. 


Commercial     Nat. 


Totter,  In  re.  457. 
Tourtelot  v.  Finke,  387. 
Tourtelot  v.  Whithed,  278. 
Tower  v.    President,   etc.,   of   Ap- 

pleton    Bank,   264. 
Towle  v.   Starz,  79. 
Town  V.  President,  etc.,  of  Bank 

of  River  Raisin,  310. 
Town    of    Fairfield    v.    Southport 

Nat.  Bank,  19. 
Town   of   Manitou   v.    First    Nat. 

Bank,  62. 
Townsend    v.    Webster    Five-Cent 

Sav.  Bank.  50. 
Townsley  v.  Sumrall.  200. 
Trabue  v.  Cook.  243. 
Traders'   Nat.  Bank  v.   Chipman. 

245,  2.51. 
Tradesmen's  Nat.  Bank  v.  Third 

Nat.   Bank,   181. 
Travers  v.  T.  M.   Sinclair  &  Co., 

122. 
Trenholm     v. 
Bank.  411. 
Trenton  Banking  Co.  v.  Woodruff, 

336. 
Tripp  V.  Curtenius,  80,  81. 
Troy  &  Cohoes  Shirt  Co.,   In  re. 

286. 
Trust  Co.  of  America  v.  Conklin, 

171. 
Trust  Co.  of  America  v.  Hamilton 

Bank  of  New  York,  161.  174. 
Trustees  of  Mutual  Building  Fund 
&  Dollar  Savings  Bank  v.  Bos- 
sieux.  305. 
TurnbuU  v.  Bowyer,  122. 
Turnbull  v.  Osborne,  101. 
Turnbull  v.  Payson,    383. 
Turner  v.   First  Nat.   Bank,   282. 
Turner  v.  Richardson,  416,  417. 
Tuttle   V.    National   Bank  of   Re- 
public, 283. 
Twining  v.  U.  S.,  411. 
Twohy  Mercantile,  Co.  v.  Melbye. 

358. 
Tyson  v.  State  Bank  of  Indiana,- 
194. 


u 

I'llman  v.  Barnard,  31. 

Unaka  Nat.  Bank  v.  Butler,  125, 

153., 
Union    Bank    v,    Canipboll,    335, 


Union  Bank  v.  Dunn,    272. 
Union  Bank  v.  Sollee.  S3.      , 
Union  Banking  Co.  of  Baltimore 

City  V.   (iittings,  329.  ' 

Union    Gold    Miu.    Co.    v.    Rocky 

Mountain  Nat.  Bank,  S3,  22S. 
Union    Nat.    Bank    v.    Chapiuan, 

200. 
Union     Nat.     Bank     v.     Citizens' 

Bank,  13,  206.  208. 
Union  Nat.  Bank  v.  Hill.  305. 
Union    Nat.    Bank    v.    Matthews. 

251,    252,    294. 
Union  Nat.  Bank  v.  Oceana  Coun- 
ty Bank,   129. 
Union  Nat.  Bank  v.  Rowan,  232. 
Union    Nat.  -Bank   of   Chicago   v. 

Louisville,   N.   A.   &   C.   R.   Co., 

237,  431. 
Union  Nat.  Bank  of  Columbus  v. 

Winsor.  40. 
Union  Nat.  Bank  of  Kansas  City 

V.   Lyops,  323. 
Union   Stock-Yards  Nat.   Bank  v. 

Gillespie.  49.  50,  69. 
Union   Stock- Yards  Nat.   Bank  v. 

Moore.  69. 
Union  Trust  Co.  v.   Preston  Nat. 

Bank,  141. 
United    German    Bank    of    Balti- 
more City  V.  Katz.  445. 
United  Security  Life  Insurance  & 

Trust    Co.    of    Pennsylvania    v. 

Central  Nat.  Bank,  90.  158. 
TJ.    S.    V.    American    Exch.    Nat. 

Bank,  173. 
U.  S.  V.  Barry,  37S. 
U.   S.  V.  Breeze,  407. 
U.  S.  V.  Britton,     .380,    407,     408, 

410. 
U.  S.  V.  City  Bank  of  Columbus, 

325. 


CASES   CITED  627 

[The  figures  refer  to  pages] 

U.  S.  V.  Corbel  t.  410. 

U.  8.  V.  Fish,  40S. 

U.  S.  V.  Harper,  JiiG.  408. 

U.  S.  V.  Heinze,  405,  406,  408.    , 

U  S.  V.  Knox,    381.    420. 

U.  S.  V.  Morse.    409. 

U.  S.  V.  National  Bank,  67. 

U.  S.  V.  National     Exch.     Bank, 


U.  S.  V.  Northway,  406,   407. 

U.  S.  V.  Potter,  406. 

U.  S.  V.  Youtsey,  4(I6,  407. 

United  States  Bank  v.  Goddard, 
197. 

United  States  Bank  v.  Wester- 
velt,    201. 

United  States  Fidelity  &  Guaran- 
ty Co.   V.  Muir,  330. 

United  States  Ins.  Co.  v.  Shriver, 

o.)  (  . 

United  States  Nat.  Bank  v.  First 
Nat.    Bank,   2,34,   285.   316,   318. 

United  States  Nat.  Bank  v.  For- 
stedt,  3.36. 

Upton  V.  National  Bank  of  South 
Reading,  282. 


Vairin  v.  Hobson,  126. 

Van  Allen  v.  Assessors,  435,  437. 

Van  Buskirk  v.  State  Bank  of 
Rocky  Ford,  139. 

Vandagrift  v.  Rich  Hill  Bank, 
390. 

Vanderford  v.  Farmers'  &  Me- 
chanics' Nat.  Bank,  .324. 

Van  Dyck  v.  ]McQuade.  447,  450. 

Van  Reed  v.  People's  Nat.  Bank, 
426,  427. 

■^'ansands  v.  Middlesex  County 
Bank,  249. 

\'an  Slyke  v.  Wisconsin.  437. 

Van  Wart  v.  Wooley,  215. 

Vap  Winkle  Gin  &  Machinery 
Co.  V.  Citizens'  Bank  of  Buffa- 
lo,  73. 

Veasie  Bank  v.  Fenno.  257,  362. 


G2S 


CASES   CITED 
[The  figures  refer  to  pages] 


Veizie  Bank  v.  Paulk,  238. 
Venaugo  Nat.  Bank  v.  Taylor,  425. 
Vere  v.   Lewis,    103. 
Vickrey   v.    State   Savings   Ass'n, 

32,  222,  223. 
Viets    V.    Union    Nat.    Bank    of 

Troy,  93. 
Voss    V.    German- American   Bank 

of  Cliicago,  72. 

w 

Wade   V.   New   Orleans   Canal   & 

Banking   Co.,   263. 
Wagner     v.     Citizens'     Bank     & 

Trust  Co.,  20,  67,  68. 
Wagner  v.  Crook,  114,  196. 
Wainwright  v.  Webster,  259. 
Waite  V.  Dowley,  364,  438. 
Wakefield  Bank  v.  Truesdell,  319, 

323. 
Walden  v.  Webber,  126, 
Walker  v.  Bank,    197. 
Walker  v.   Manhattan  Bank,   17, 

49. 
Walker  v.  St.    Louis    Nat.    Bank, 

330. 
Walker  v.  State  Trust  Co.,  48. 
Walker    v.    Windsor    Nat.    Bank, 

431. 
Walker  Bros.  v.  Ski  iris,  84. 
Wall  V.  Provident  Inst,  for  Sav- 
ings,  452. 
Wallabout  Bank  v.  Peyton,  41. 
Wallace    v.    Exchange    Bank    of 

Spencer,  311. 
Wallace  v.  Hood,  279,  375. 
Wallace  v.  State  Bank,  272. 
Wallace  v.  Stone,   208,   356. 
Walsh  r.  U.   S.,  409. 
Walsh.  Boyle  &  Co.  v.  First  Nat. 

Bank,    253. 
Walton  V.  Riverside  Bank,  36. 
Ward    V.    Johnson,    23,    56,    283, 

448. 
Ward  V.  Smith,  191,  201,  258. 
Warhus    v.   fBowery    Sav.    Bank, 
451. 


Warner  v.  McMullin.  306. 
Warner  v.  Pen^^yer,  301,  303. 
Warren  v.  Gilman,  322. 
Warren  v.  Robison,   301. 
AVarren  v.  Shook,  6. 
Warren  Bank    v.    Suffolk    Bank, 

198. 
Warren  Deposit  Bank  v.  Fidelity 
&  Deposit  Co.  of  Maryland,  3.30. 
^Varren   Deposit   Bank  v.   Robin- 
son's Adm'rs,  238. 
Warren  'Deposit  Bank  v.  Youug- 

love,  234. 
Warren-Sharf    Asphalt   Pav.    Co. 
V.  Commercial  Nat.  Bank,  122. 
Wasgatt  V.  First  Nat.  Bank,  129, 

155. 
Washington  Brick,   Lime  &  Mfg. 
Co.  V.  Traders'  Nat.  Bank.  55. 
Washington  County  Nat.  Bank  v. 

Lee,  365. 
Washington  Nat.  Bank  v.  Eckels, 

415. 
AVashington  Nat.  Bank  v.  Pierce, 

334. 
Wasson  v.  Hawkins,  350,  355. 
Wasson  v.   Lamb,   26,   35. 
Yv^aterloo  ]Milliug  Co.  v.  Kuenster, 

215,  220. 
Waters  v.  Bank  of  Georgia,  264. 
Watkins    v.     National    Bank    of 

Lawrence,    412. 
Watson  V.  Fagner.   288. 
Watson     V.     President,     etc.,     of 

Phcenix  Bank,  61,  92. 
Watson  V.  Roth,   288. 
Watson  V.  Watson,  458. 
Watt    V.    Gans,    111. 
Wntts  V.  Board  of  Com'rs,  44. 
Watts  V.   Christie.    70. 
Waxahachi  Nat.  Bank  v.  Vickery, 

311. 
Way  V.  Butterworth,  8. 
Way  V.  Towle,  100. 
Wayne     Covmty     Sav.     Bank     v. 

Airey,  50, 
Weaver  v.  Kelly.  432. 
^^'ebb  V.  Smith.  72. 


CASES   CITED 
[The  figures  refer  to  pages] 


G29 


Weber  v.  Bank  for  Savings,  51. 
Weber    v.    Spokane    Nat.    Bank, 

284. 
Weckler  v.  First  Nat.  Bank,  287. 
Wedge  Mines  Co.  v.  Denver  Nat. 

Bank,    15S. 
Weed  V.  Bergh,  9. 
Weedsport    Bank    v.    Park    Bank, 

57. 
Weeks  v.  International  Trust  Co., 

281,  432. 
Wegner    v.    Second    Ward    Sav, 

Bank,  453. 
Weinand's    Adm'r    v.    State   Nat. 

Bank  of  Maysville,  97,  154.  155. 
Weiustein    v.    National    Bank    of 

Jefferson,  87. 
Weisinger    v.    Bank    of    Gallatin, 

27. 
Weisser's  Adni'rs^v.  Denison,  86. 
Welge  V.  Batty,  203. 
Welles  V.  Graves,  381,  404,  411. 
Welles  V.  Larrabee,  387. 
Welles  V.   Stout,   .393. 
Wellington  Nat.  Bank  v.  Bobbins, 

122.  172. 
Wells    Fargo    &    Co.    v.    Enright, 

315. 
Wells    Fargo   &   Co.    v.    Nortliern 

Pae.  R.  Co.,  2,  3. 
West  V.  St.  Paul  Nat.  Bank,  196. 
Westberg   v.    Chicago   Lumber   & 

Coal  Co.,  1.39. 
West    Branch    Bank    v.    Fulmer, 

197. 
West     Branch     State     Bank     v. 

Haines.  111. 
Western  Bank  of  Louisville,  Ky., 

V,  Coldemey's  Ex'x,  299. 
Western    German    Bank    v.    Nor- 

vell,  209,  356. 
Western  Inv.  Banking  Co.  v.  Mur- 
ray, 3. 
Western  Nat.  Bank  v.  Armstrong, 

283,  309.  313.  314,  322. 
Western  Nat.  Bank  v.  Kelly,  274. 
Western    Union    Tel.    Co.    v.    Bi- 

Metallic  Bank,  158. 


Western  Wheeled  Scraper  Co.  v. 

Sadilek,  114. 
Westervelt  v.  Mohre£§J;echer,  397. 
Westfall   V.   Bra  ley,  259. 
Westfield  Bank  v.  Cornell,  337. 
Westminster    Bank    v.    Wheaton, 

100. 
Westminster    Nat.    Bank    v.    New 

England  Electrical  Works,  249, 

278. 
West    St.    Louis    Sav.    Bank    v. 

Shawnee     County     Bank,     319, 

•)Orr 
o— .J. 

Wetherow    v.    Lord,    459. 
Vv'halen  v.  Milholland,  459,  460. 
Wheat  V.  Bank  of  Louisville,  314. 
Wheaton  v.  Daily  Telegraph  Co., 

64. 
Wheeler  v.  Aiken  County  Loan  & 

S.  Bank,  29S. 
Wheeler  v.  Counneroial  Bank  of 

Moscow,  92. 
Wheeler  v.  Union  Nat.  Bank,  242. 
Wherry  v.  Hale,  282. 
Whipple  V.  Walker,  201. 
Whistler  v.  Forster,  96. 
Whitaker    v.    Bank    of    England, 

147. 
Whitbeck      v.      Mercantile      Nat. 

Bank,  4.30. 
Whitcomb   v.   Carpenter,   22, 
White  V.  Gushing,  104. 
White  V.  How,  260. 
White  V.  Meadowcroft, 
White  V.  Miners'    Nat. 
AVhite     V.      President. 

Franklin  Bank,  92. 
Whitehead  v.  Smith.  459. 
Whitney  v.  Butler,  389. 
Whitney  v.  First  Nat.  Bank,  16. 
Whitt(>more     v.     Amoskeag     Nat. 

Bank,   430. 
Wichita  Nat.  Bank  v.  Maltl)y,  50. 
Wichita  Nat.  Bank  v.  Smith.  4.33. 
Wickford    Sav.    Bank    v.    Corey, 

458.  ^    , 

Wickham  v.  Hull.  ,388. 
Wiggins  V.   Stevens,  94. 


359. 


92. 

Bank.  .30. 
etc.,      of 
294,  295. 


G30    . 

\Yild  V.  Bank  of  Passamaquoddy, 
322. 

Bank, 


16. 


Wiley  V.  Bunker  Hill  Nat, 

05.  145.  14G. 
Wiley  V.  First  Nat.  Bank, 
Wiley  V.  Starlmck,  240. 
Willets  V.  Phoenix  Bank,  10.3,  1.32. 
Willey      V.      Crocker- Woolworth 

Nat.  Bank,  69. 


111. 


Braun,  114. 

Brown,  109 

Cox.    36. 

McDonald,  447. 

McKay,  446,  447. 

Riley,    447. 

Van     Norden     Trust 


V.    American    Bank, 


Williams  v. 
Williams  v. 
Willirims  V. 
Williams  v. 
Williams  v. 
Williams  v. 
Williams  v. 

Co.,  351. 
Williamson 

395. 
Williamson  v.  Williamson,  86. 
Willis  V.  Finley.  112. 
Willis  V.  Smyth.  457. 
Willou?hby  v.  Fidelity  &  Deposit 

Co.  of  Maryland.  330. 
Willoughby    v.    Weinberger,    356. 

358. 
Wilson  V.  Carlinville  Nat.   Bank, 

216. 
Wilson  V.  Dawson.  68. 
Wilson  V.  Edwards.   458. 
Wilson    V.     Merchants'     Loan     & 

Trust  Co.,  386. 
Wilson     County     v.     Third     Nat. 

Bank,   430. 
Winchester  v.  Howard.  448. 
Winchester  Mill.  Co.  v.  Bank  of 

Winchester,  196.  216,  219.  220. 
Wintield    Nat.    Bank    v.    McWil- 

liams,   222. 
Wlngate  v.   Orchard,  394. 
AYinsert  v.  First  Nat.  Bank,  281. 
Winslow    V.    Everett    Nat.    Bank, 

171. 
Winsor  v.  Lafayette  County  Bank, 

325. 
Wirstanley  v.  Second  Nat.  Bank. 

206. 


CASES   CITED 
[The  figures  refer  to  pages] 

Wi-sner  v.  First  Nat.   Bank,  116, 

139. 
Winter  v.  Baldwin,  379. 
Winter    v.     Williamsburgh     Sav. 

Bank,  453. 
Winters  v.  Armstrong,  370. 
Winton  v.  Little.  312. 
Witte  V.  Vincenot,  26. 
Witters  v.   Sowles.  298,  381,  387, 

388.  390.  394.   399. 
Wittich  V.  First  Nat.  Bank,  116. 
Wolf  V.  Bureau,  310. 
Wolf  V.  National  Bank  of  Illinois, 

419. 
Wolverton      v.      Exchange      Nat. 

Bank,    241. 
Wood    V.    American    Nat..  Bank, 

146. 
Wood  V.  Boylston  Nat.  Bank,  69, 

210. 
Wood     V.     Merchants'.    Savings, 

Loan  &  Trust  Co.,  59. 
Woodhouse    v.    Crandall,    22,    75, 

356. 
Wood   River   Bank  v.   First  Nat. 

Bank,  99.  116.  197,  198. 
'SYoodruff  V.   Merchants'   Bank  of 

City  of  New  York,  100.  103. 
Woods  V.  Milford  F.  C.  Sav.  Inst.. 

55. 
Woodworth    v.    Old    Second    Nat. 

Bank.  379. 
Woolbridge   v.    First    Nat.    Bank. 

43. 
Woolen    V.     New     York    &    Erie 

Bank,  203. 
Wooley  V.  Lyon,  199. 
Worcester   County   Bank   v.   Dor- 
chester &  M.  Bank.  200,  261. 
Workingmen's     Banking     Co.     v. 

Rautenl)erg.    228. 
Worth  V.  Bank  of  Hanover,  272. 
^Vright.  In  re.  403. 
Wright  V.  MacCarty.   119. 
Wright  V.  Merchants'  Nat.  Bank, 

414. 


CASES   CITED 
[The  figures  refer  to  pages] 

Wrigley  t.  Farmers'  &  Mer- 
chants' State  Bank,  119. 

Wunderlich  v.  Merchants'  Nat. 
Bank,  G4.  65. 

Wyatt  V.  Norris,  50. 

WyckoCf  V.  Anthony,  211. 

Wyckoff.  Church  &  Partridge  v. 
Riverside  Bank,  ;}12. 

Wyer  v  Dorchester  &.  Milton 
Bank,  261. 

WykoCe  V.  Irvine,  288. 

Wylie  y.  Northampton  Nat.  Bank, 


631 


17. 
Wyman 


V.    Colorado   Nat.    Bank, 
Ft.     Dearborn     Nat. 


Wyman     v. 
Bank,  67. 

Wyman  v.  President,  etc.,  of  Hal- 
lowell  &  Augusta  Bank,  329. 

Wyman  v.  Wallace,  283,  395,  431, 
432. 

Wynn      v.      Tallapoosa      County 
Bank,  63,  299. 

W.  &  A.  McArthur  Co.  v.  Old  Sec- 
ond Nat.  Bank,  204, 


Yarhorough    v.    Banking   Loan   & 

Trust   Co.,    94,    l^Htr 
Yardley  v.   Clothier,  74,  425. 
Yardley  v.   Philler,  179,  187,  424. 
Yardley  v.  Willgus.  .387. 
Y'ates    v.   Jones    Nat.    Bank,   399, 

400,  404. 
Yates  V.  Utica  Bank,  400. 
"iocum  V,  Smith,  169. 
Young   V.   Adams.   258. 
Younu;  v.  American  Bank,  76,  81. 
Y'oung   V.    (Irote,    170. 
Young  V.  Wempe.  39:!. 
Y^ouuglilood  V.  P.irmingham  Trust 

&   Sav.   Co.,   238. 


Zaloom  V.  Ganim,  112. 

Zander  v.   New  York   Security  & 

Trust  Co.,  77. 
Zeis  V.  Potter,  336. 
Zinn  V.  Baxter,  402. 
Zinn  V.  Mendel.  448. 


INDEX 


[the    I'IGUBES    REFER   TO    PAQES] 


A 

ABSTRACTION, 

Of  funds  of  national  banks  by  oflicer,  405. 

ACGKl'TANCE, 

Payable  at  bank,  whether  authority  to  bank  to  "pay,  58. 
Of  check,  131. 

See  Checks. 
Presentment  of  bill  of  exchange  for,  by  coUcctint?  bank,  192,  194. 

See  Collections. 

ACCOMMODATION, 

Power  of  banking  corporation  to  become  party  for,  2S5. 

ACCOUNT, 

Statement  of  by  bank,  84. 
See  Deposits. 

ACKNOWLEDGMENT, 

Of  organization  certificate  of  national  bank,  364,  4S0. 

ACTION, 

For  deposit,  90. 

See  Deposits. 
By  and  against  national  banks,  428. 
See  National  Banks. 
When  United  States  a  party,  how  conducted,  468. 
Jurisdiction  of  district  courts  of  suits  against,  4G8. 

Of  suit  by  national  bank  to  enjoin  comptroller  of  cur- 
rency or  receiver,  468. 
Citizenship  of  national  banks  for  purposes  of  suit,  468. 

ADMISSIONS, 

Of  officer  of  bank,  328. 

See  Itepresentation  of  Bank  by  Ofticers. 

ADVERSE  CLAIMS. 

To  deposit,  payment  in  case  of,  4:5. 
Right  of  bank  to  set  up,  on  notice  of,  50. 
See  Deposits. 

TIFF.BKS.&  B.  (633) 


G34  INDEX 

[The  figures  refer  to  pages] 

ADVERSE  INTEREST, 

Of  officer,  as  affecting  notice  to  bank,  "HO. 

AGENCY, 

Rules  of  applicable  to  representation  of  bank  by  officers,  308. 
See  Representation  of  Bank  by  Officers. 

AGENT, 

For  collection,  bank  as,  28,  189. 

See  Collections.  ' 

Deposit  by,  42,  47. 
Bank's  lien  on  deposit  of,  68. 

See  Deposits. 
Of  banking  corporation,  .see  Representation  of  Bank  by  Officers. 
To  wind  up  affairs  of  national  bank,  413,  420. 

ALTERED  CHECK, 

Certification  of,  134. 
Payment  of,  159. 
See  Checks. 

ANTEDATED  CHECK, 
Effect,  102. 

See  Checks. 

APPARENT  OWNER, 
Deposit  by,  43. 
See  Deposits. 

ARTICLES  OF  INCORPORATION, 
Of  banking  corporation,  268. 
Of  national  banks,  364,  479. 

ASSIGNMENT, 

Of  deposit,  42,  52. 
Check  as,  127. 

ATTACHING  CREDITORS, 

Rights  against  unregistered  transferee  of  national  bank  stock, 
375. 
See  Attachment. 

ATTACHMENT, 

Of  deposit,  42,  53. 
Against  national  bank,  425. 
See  Attaching  Creditors. 

AUTHORITY, 

Of  officers  and  agents,  see  Representation  of  Bank  by  Officers 

B 

BAILMENT, 

Special  deposit  is,  15 

Whether  deposit  of  paper  for  collection  is.  37. 


INDEX  635 

[The  figures  refer  to  pages] 
BAXK, 

Dertnition,  2. 
Essential  functions,  2. 

Deposit,  discount,  and  circulation  or  issue,  2."^^ 
Otlior  functions,  0. 
Kinds  of  banks.  7. 
Riglit  to  engase  in  banking,  8.  i 

See  Ranking  Corporations;   National  Banks;   Savings  Banks. 

BANK  BILLS, 

See  Banlv  Notes. 

BANK  DRAFT, 

Whether  check,  99. 
Prf'sentment  of,  111. 

BANIvEK, 

Definition,  2. 
See   Bank. 

BANKING, 

Functions  of,  1. 

Essential  functions,  2. 

Other  functions,  6. 
Right  to  engage  in,  8. 

See  Bank. 

BANKING  CORPORATIONS, 

Power  to  receive  special  deposits,  16. 

Power  to  issue  certificates  of  deposits,  78. 

Power  to  certify  checks,  140. 

Power  to  make  collections,  189. 

Power  to  make  loans  and  discounts,  225,  227. 

See  Loans  and  Discounts. 
Power  to  issue  bank  notes,  256,  261. 
Scope  of  discussion,  267. 
Povs^er  to  incorporate,  267. 
Methodr.  of  incorporation,  268. 
Place  of  transacting  business,  269. 

National  banks,  270.  ^ 

Branch  banks.  268,  272. 

Foreign  banking  corporations,  272. 
Capital  stock.  274. 
Power  cs  to  contracts,  275. 
Power  to  buy  and  sell  property,  276. 

Exchange,  coin,  and  bullion,  277. 
National  banks,  277. 

Stock  in  other  corporations,  277. 
National  banks,  277. 
Effect  of  ultra  vires  transaction,  278. 


036  INDEX 

[The  figures  refer  to  pages] 

BANKING  CORPORATIONS— Cont'd. 

Bank's  own  stock,  279. 
National  banks,  279. 
Effect  of  unauthorized  purchase,  279. 
Real  estate.  2S0. 

Banking  house,  280. 
National  banks,  281. 

Effect  of  unauthorized  purchase,  280,  282. 
Power  to  borrow  money,  282. 
National  banks,  283. 

Limit  of  indebtedness,  283. 
Effect  of  exceeding  limit,  284. 
Power  to  enter  into  contract  of  guaranty  or  suretyship,  284. 
National  banks,  284. 
Effect  of  ultra  vires  contract,  286. 
Power  to  enter  into  other  contracts,  287. 
Lending  money  for  customer,  287. 
Contract  of  partnership.  288. 
Ultra  vii-es  acts  and  contracts,  289. 
Meaning  of  ultra  vires,  289,  290. 
Effect  of  ultra  vires  contract,  289,  290, 

Doctrine  of  federal  courts,  291. 
Effect  of  prohibition  in  charter,  294. 

National  banks,  effect  of  transactions  unauthorized  or  pro- 
hibited by  national  bank  act,  295. 
Liability  of  officers,  296. 

Officers  and  agents  in  general,  297. 
Liability  at  common  law,  298. 

Remedies  of  corporation  and  stockholders.  296.  .304. 
Remedy  of  creditors  of  insolvent  corporation,  297,  304. 
Directors,  300. 
Statutory  liability,  297,  306. 

See    Representation    of    Bank    by    Officers;     National 
Banks;    Savings  Banks. 

BANKING  HOUSE, 

Power  of  banking  corporation  to  own,  280. 

BANK  NOTES, 

Definition  and  character,  256. 
Issue  of,  as  a  banking  function,  250. 
Power  to  issue,  256,  261. 
Necessity  of  demand,  256,  262. 

Statute  of  limitations,  256,  262. 
National  bank  notes,  256,  265. 
Formal  requisites,  2.57. 
As  tender  and  payment,  257. 

When  counterfeit,  258. 
Rights  of  holder  in  due  course,  260. 


INDEX  637 

[The  figures  refer  to  pages] 
BANK  NOTES— Cont'd. 

Lost  and  destroyed  notes,  2G3. 
Security  for  circulation.  liO"). 

Power  of  Congress  to  restrain  circulation  of,  302;**^ 
See  National  Bank  Act. 

BANKIUJPTCY, 

Paukiui:   corporations  niay  not  be  adjudged   involuntary   bank- 
rupts, o4G. 
See  Insolvency. 

BILL  OF  EXCHANGE, 

Distinguished  from  check,  9S. 

See  Checks. 
Duty  of  collecting  bank,  192. 
With  bill  of  lading  attached,  203,  252. 
Power  of  banking  corporation  to  buy  and  sell,  277. 

BILL  OF  LADING, 

Attached  to  draft,  surrender  by  collecting  bank,  203. 

See  Collections. 
Accompanying  draft  discounted  by  bank,  rights  and  liabilities  of 
bank,  252. 
See  Loans  and  Discounts. 
BONDS, 

National,- as  security  for  circulation,  265. 

See  National  Bank  Act. 
Power  of  national  bank  to  deal  in  national,  2S7. 
BOOKS. 

Right  of  shareholder  to  examine. 

See  National  Banks;    Pass  Books. 

BORROWING  MONEY, 

Power  of  banking  corporations,  282. 

See  Banking  Corporations. 
Power  of  directors,  309. 
Power  of  president,  314. 
Power  of  cashier,  322. 

BRANCH  BANKS. 

Power  to  establish,  269,  272. 
See  Banking  Corporations. 

BULLION, 

Power  of  banking  corporations  to  buy  and  sell,  276. 
National  banks,  277. 

BY-LAWS. 

Power  of  banking  corporations  to  make.  275. 
Of  national  bank  as  to  lien  on  shares,  .".77. 
Of  savings  banks,  see  Savings  Banks. 


638  INDEX 

[The  figures  refer  to  pages] 


CAPITAD  STOCK, 

See  Banking  Cori>orations;  National  Bank  Act;  National  Banks. 

CASHIER, 

Of  bank,  powers  in  general.  311.  .318. 

Inherent  or  customary  authority.  319. 
Limit  upon  apparent  authority,  320. 
Authority  express  or  implied,  320. 
Ratification  by  directors,  321. 
Inherent  powers,  321. 

To  receive  deposits.  321. 

To  issue  certificates  of  deposit,  321. 

To  di'aw  checks,  .321. 

To  certify  checks,  321. 

To  buy  and  sell  exchange,  321. 

To  indorse  and  transfer,  322. 

To  make  collections,  322. 

To  rediscount  paper,  322. 

To  borrow  money,  322. 

To  transfer  shares  on  books,  323. 
Powers  not  inherent,  323. 

Not  to  act  outside  customary  business  of  banking,  323. 
Signature  to  negotial:)le  instruments.  .326. 
Admissions  and  representations,  32S. 
Notice  to,  as  affecting  bank,  333,  .336. 

See  Representation  of  Bank  by  Officers. 
Of  national  bank,  appointment,  396. 

CERTIFICATE, 
Of  deposit,  75. 

See  Deposits. 
Clearing  house  certificate.  187. 
Of  organization  of  national  bank,  364.  .365,  469. 
Of  national  bank,  to  commence  business,  516. 

National  Bank  Act,  see  National  Banks. 

CERTIFICATION, 

Of  check,  see  Checks. 

CERTIFIED  CHECKS, 
See  Checks. 

CHECKS, 

Definition,  96. 
In  general.  96. 

Differences  between  check  and  demand  bill,  9S. 
Must  be  drawn  on  bank  or  Ininker,  98. 
When  drawn  on  foreign  bank,  99. 
Must  1)6  payable  on  demand,  99. 


iNDiox  639 

[The  figures  refer  to  pages] 
CHECKS— O.iifd. 

Mciiiuiaiuluiu  checks,  100. 

Other  formal  recitiisites,  lOl. 

Date.  101.  "*"*■ 

Designation  of  payee,  102. 

Form  of  order,  104. 

^lust  he  i)a.val)le  in  money,  105. 
Signature,  100. 
Llahility  of  drawer  to  holder,  107. 

Presentment  and  notice  of  dishonor.  107,  lOS. 
In  general.  108. 

lieasonal)le  time  for  presentment,  107.  109. 
Presentment,  how  made,  ll.S. 
Notice  of  dishonor — protest.  114. 
Excuses  for  ftulure  to  present  and  give  notice,  116. 
Presentment  and  notice  hefore  suit,  117. 
Statute  of  limitation.  118. 
Negotiability  and  transfer,  119. 
In  general.  119,   120. 
Liability  pf  indorser,  119,  121. 

Presentment  and  notice  of  dishonor,  119,  122. 
Holder  in  due  course.  120.  125. 
When  overdue  or  stale,  120,  126. 
Liability  of  drawee  to  holder,  127. 

By  weight  of  authority  check  does  not  operate  as  assign- 
ment, 127. 
Otherwise  in»some  jurisdictions,  129. 
Certified  checks,  1.31. 

Nature  and  effect  of  certification,  l.'Jl. 
Liability  of  bank,  131. 

Certification  of  forged  or  altered  check,  1.34. 
Liability  of  drawer  and  indorsers,  131,  13G. 
Form  of  certification,  138. 
Power  and  authority  to  certify,  140. 
Power  of  president  to  certify,  141. 
Power  of  cashier  to  certify,   141,  321. 
Power  of  paying  teller  to  certify,  141,  .328. 
Certified  notes.  142. 
Payment  of.  143  et  seq. 

Duty  of  bank  to  depositor,  143. 

Damages  for  wrongful  dishonor.  143,  14.5. 
When  refusal  to  pay  is  wrongful,  140. 
Rights  of  bank  upon  payment,  148. 
In  general.  148. 
Payment  under  mistake  as  to  suHiciency  of  deposit.  148, 

149. 
Time  of  payment,  151. 
When  bank  protected  in  paying,  150. 


640  INDEX 

[The  figures  refer  to  pages] 

CHECKS— Cont'd. 

Revocation  of  order,  148,  152. 
'  Death  of  dra\Aer,  153. 

Insanity  of  drawer,  155. 
Signature  of  check,  155. 
Conformity  to  order,  157. 
Forged  checks,  159. 

Signature  of  drawer  forged,  159. 
Rights  of  bank  against  drawer,  160. 
Rights  of  bank  against  payee— doctrine  of  Price  v.  Neal, 
161. 
Altered  check,  159. 

Rights  of  bank  against  drawer,  166. 
Rights  of  bank  against  payee.  167. 
Negligence  facilitating  alteration,  169. 
Forged  indorsement,  159. 

Rights  of  bank  against  drawer.  171. 
Rights  of  bank  against  payee,  172. 
Rights  of  true  holder,  173. 
Fictitious  payee,  173. 
Fraudulent  impersonation,   175. 
Effect  of  payment  through  clearing  house,  179. 
See  Clearing  Houses. 
Issued  by  bank. 

Rights  of  holder  on  drawer's  insolvency,  352. 
Rights  of  holder  on  drawee's  insolvency,  352. 
Wrongfully  certifying  by  officer  of  national  bank,  103. 
See  National  Banks. 

CIRCULATING   NOTES, 

See  National  Bank  Act. 

I 

CIRCULATION, 
Banks  of,  3. 

See  National  Bank  Act. 

CITIZENSHIP, 

Of  national  banks,  for  purposes  of  actions,  42S. 
See  National  Banks. 

CLEARING  HOUSES, 

Presentment  of  check  through,  whether  time  thereby  extended, 

112. 
Clearing  house  system  in  general,  177. 
Effect  of  payment  throuTh  clearing  house.  179. 
Return  of  checks  not  found  good.  ISO. 

Failure  to  return  within  time  fixed  by  rule — effect  as  pay- 
ment, ISO. 
Effect  of  rules— members  and  nonmembers,  184. 
Clearing  house  certificates,  187. 


INDEX  641 

[The  figures  refer  to  pages] 

COIN, 

Power  of  banking  corporations  to  buy  and  sell,  li76. 
National  banks,  277.  ^^ 

collati:ral  skcukity, 

Duty  of  bank  to  keep  safe,  18. 
For  loan  by  banks,  240. 

See  Loans  and  Discounts. 

COLLECTIONS, 

Deposit  of  paper  for,  28,  29. 

Sale  or  deposit  for  collection,  28,  33. 
Checks  on  depository,  29,  38. 
Depository  as  liolder  in  due  course,  .39. 
Power  of  banking  corporation  to  make,  189. 
Relation  between  depositor  for  collection  and  bank.  189. 

Note  payable  at  bank,  191. 
Duties  of  bank  in  making,  192. 
In  general,  192. 
Presentment  of  paper,  192,  191. 

Sending  paper  to  drawee  or  debtor,  19.j. 
Giving  notice  of  dishonor,  192,  196. 
Making  protest,  192,  194. 

Liability  of  bank  for  default  of  notary,  198. 
Following  instructions,  192,  200. 
Exercise  of  good  faith,  192.  201. 

Securing  priority,  201. 
Conflict  of  laws  as  to  presentment,  notice  of  dishonor  and 

protest,  199. 
Medium  of  payment,  201. 
Surrender  of  attached  bills  of  lading,  203. 
Rights  and  liabilities  as  to  proceeds  of.  204. 
Relation  of  bank  to  customer,  204,  205. 
Insolvency  of  bank,  205.  208. 
Bank's  lien.  205,  210. 
When  instructed  to  remit,  207. 
By  correspondent  bank,  212. 

Relation    l)etween    depositor   and    depositary   and   collecting 
bank,  212. 
Collection  by  correspondent  bank,  in  general,  212,  213. 
Liability  of  depositary  and  collecting  bank,  217. 
Right  of  set-off  of  collecting  bank  against  forwarding  bank. 

213,  220. 
Lien  of  collecting  bank  on  paper  forwarded  for  collection 
and  proceeds.  212,  221. 

COMMERCIAL  PAPER. 

See  Collections;    Deposits;    Ix)ans  and  Discounts. 
Tiff.Bks.&  B. 


G42  INDEX 

[The  figures  refer  to  pages] 

COMPTROLLER  OF  CURRENCY, 

Authorization  of  national  banks  to  commence  business,  365. 

Certificate,  365. 
-     Effect  of  certificate  as  evidence,  365. 
Approval  of  extension  of  corporate  existence,  368. 
Approval  of  increase  of  capital  stock,  369. 
Approval  of  reduction  of  capital  stock,  372. 
To  issue  certificate  on  organization  of  state  bank  as  national 

bank,  376. 
Appointment   of  receiver   by,   to  enforce  shareholders'   liability, 

involuntary  liquidation,  392. 
Appointment  of  receiver  to  wind  up  national  bank,  413. 
To  be  chief  officer  of  currency  bureau  (§  324),  463. 
Appointment,  salary,  etc.  (§  325),  464. 
Oath  and  bond  of  (§  326),  464. 
Deputy   comptroller,  appointment,  salary,  duties,  oath,  and  bond 

(§  327).  464. 
Employment  of  clerks  by  (§  328),  465. 
Not  to  be  interested  in  national  banks  (§  329),  465. 
Seal  of  office  of  (§  3.30),  465. 

Rooms,  vaults,  furniture,  etc.,  for  currency  bureau  (§  331),  466. 
Examination  of  banks  of  District  of  Columbia  by  (§  332),  466. 
Report  to  Congress  (§  333),  466. 

Certificates,  etc.  and  copies  of  papers  in  office  of,  evidence  (§ 
884),  469. 
See  National  Bank  Act;   National  Banks. 
Clerical  force  in  office  of,  for  redemption  of  circulating  notes, 

expenses,  534. 

CONFLICT  OF  LAWS, 

As  to  presentment,  notice  of  dishonor  and  protest,  199. 
See  Collections. 

CONSTRUCTIVE  TRUSTEE, 
See  Trustee. 

CONTRACTS, 

Power  of  banking  corporations  as  to. 
See  Banking  Corporations. 

CORPORATIONS, 

See  Banking  Corporations. 

CORRESPONDENT  BANK, 
Collection  by,  212. 
See  Collections. 

COUNTERFEIT. 

Bank  notes,  as  payment,  257. 
See  Crimes. 


INDEX  G43 

[The  figures  refer  to  pages] 
COUNTERMAND, 

Of  payment  of  check,  152. 
See  Checks. 

CRIMES, 

Of  officers  of  national  bank,  405. 

See  National  Banks. 
National  banks  contributing  for  political  elections.  571. 
"Obligations  or  other  securities  of  the  United  States"  defined. 

571. 
Forging  or  counterfeiting  securities,  572. 
Counterfeiting  national  bank  notes,  572. 
Using  plates  to  print  notes  without  authority,  572. 
Uttering,  etc.,  forged  obligations,  574. 
Taking  impressions  of  tools,  etc.,  574. 
Having  possession  of  impressions,  575. 
Dealing  in  counterfeit  securities,  575. 
Circulating  bills  of  expired  banks,  575. 
Imitating  national  bank  notes  with  advertisements,  576. 
Mutilating,  etc.,  national  bank  notes,  576. 
Imitating  securities  or  printing  advertisements  thereon,  577. 
Issuing  notes  less  than  one  dollar,  577. 

Using  mails  to  promote  frauds,  counterfeit  bank  notes,  577. 
Using  fictitious  address,  578. 

CURRENCY, 

Certificate  of  deposit  payable  in,  78. 
Check  payable  in,  105. 

CURRENT  FUNDS, 

Certificate  of  deposit  payable  In,  78. 
Check  payable  in,  105. 

D 

DAMAGES, 

For  wrongful  dishonor  of  check,  145. 

DATE. 

Of  check,  101. 
See   Checks. 

DE.VTH, 

Of  depositor,  55. 

Of  drawer,  as  reA'ocation  of  order  to  pay  check,  153. 
See  Checks. 

DECLARATIONS, 

Of  officer  of  bank,  328. 

See  Representation  of  Bank  by  Officers. 


644  INDEX 

[The  figures  refer  to  pages] 
DELIVERY, 

Of  savings  bank  pass-book,  458. 
See  Savings  Banks. 

DEMAND. 

For  payment  of  deposit,  56. 

For  payment  of  certificate  of  deposit,  75,  79. 

In  action  for  deposit,  90. 

See  Deposits. 
Whetlier  necessary  to  charge  maker  of  bank  note,  25G,  262. 

DEPOSIT, 

Banks  of,  2. 

DEPOSITORIES, 

Public,  national  banks,  as,  see  National  Bank  Act. 

DEPOSITS, 

Receiving,   a   banking  function,   1. 
Kinds  of,  11. 

General  deposits,  11,  12. 

Relation  between  bank  and  depositor,  12. 

Payment,  of,  14. 

Duty  to  receive,  15. 

Special  deposits,  12,  15. 

Power  of  incorporated  bank  to  receive,  16. 
Power  of  national  bank  to  receive,  16. 
Liability  of  bank,  17. 
Collateral  security,  18. 
For  specific  purpose,  12,  20. 
Duty  of  bank.  20. 

Relatipn  between  bank  and  depositor,  20. 
Character  of,  how  determined,  23. 
General  deposits,  receipt  and  entry  of,  24. 
Mode  of  depositing,   with  whom,  24. 
Entry  in  pass-book,  25. 
Power  of  cashier  to  receive,  321. 
Deposit  of  paper.  28. 
In  general,  29. 
For  collection.  28,  29. 
Sale  or  deposit  for  collection,  28,  P>3. 
Checks  on  depository,  29,  38. 
Depository  as  holder  in  due  course,  39. 
Title  to  and  disposition  of  general  deposits,  41. 
in  general,  42. 
Deixjsit  by  trustee,  41,  44. 
Deposit  by  agent,  42,  47. 

Deposit  in  name  of  another  than  depositor,  42,  51. 
Assignment  of  dewsit,  42,  52. 
Gar.iishment  or  attachment  of  deposit,  42,  53. 
Deposit  by  apparent  owner,  43. 


INDEX  645 

[The  figures  refer  to  pages] 
DEPOSITS— Cont'd. 

Right  of  equitable  owner  of  deposit,  49. 

Death  of  depositor,  55. 
Payment  of.  5U.  ^:;^*^ 

Necessity  of  demand.  56. 

Interest  on  deposit,  50,  60. 

Demand,  how  made,  57. 

Note  or  acceptance  payable  at  bank,  58. 

Payment  in  money,  59. 
Banli's  lien  or  right  of  set-off  on  general  depo.'nt,  61. 

In  general,  61,  62. 

Deposit  made  and  debt  owing  in  different  capacities,  62,  67. 

Right  of  surety  to  have  deposit  applied,  62,  71. 
Set-off  by  depositor,  73. 
Certificate  of  deposit,  75. 

Definition  and  effect.  75. 

Necessity  of  demand,  75,  79. 

Statute  of  limitation,  75,  80. 

Power  of  bank  to  issue,  78. 

Power  of  cashier  to  issue,  321. 
Over-drafts,  82. 
Statement  of  account,  84. 

Effect  of,  84,  85. 

Duty  of  depositor  to  examine  and  effect  of  failure,  84,  86. 
Action  for  deposit.  90. 

Necessity  of  demand,  90. 

Statute  of  limitation,  90,  92. 

Burden  of  proof,  90,  94. 
Receiving  after  insolvency,  .349. 

See  Insolvency. 
Wrongful  receipt  of,  354. 

Bank  a  constructive  trustee,  354. 

Following  trust  fund,  354. 

In  savings  bank,  relation  between  bank  and  depositor,  448. 

Gift  of,  in  savings  bank,  454. 
See  Savings  Banks. 
Of  bonds,  by  national  banks,  see  National  Bank  Act. 

DEPOSIT  SLIPS, 

On  making  deposit.  26. 

DIRECTORS, 

Of  banking  corporation,  liability  of,   296. 
See  Banking  Corporations. 
Powers,  see  Representation  of  Bank  by  Officers. 
Of  national  bank,  appointment  and  qualification,  396. 
See  National  Bank  Act. 


646  INDEX 

[The  figures  refer  to  pages] 
DISCOUNT, 

Banks  of,  2. 
Meaning  of,  226,  228. 

See  Loans  and  Discounts. 

DISHONOR, 

Of  check,  liability  of  bank  to  customer,  143. 
See  Checks. 
Notice  of,  see  Notice. 

DISSOLUTION, 

Of  banking  corporation,  345. 
Of  national  bank,  410. 

See  National  Bank  Act;   National  Banks. 

DISTRICT  ATTORNEYS, 

To  conduct  suits  respecting  national  banks,  when,  468. 

DIVIDENDS, 

See  National  Banks. 

DRAFT, 

Issued  by  bank,  rights  of  holder  on  drawer's  insolvency,  352. 
Rights  of  holder  on  drawee  bank's  insolvency,  352. 
See  Bank  Draft ;    Bill  of  Exchange ;    Checks. 

DRAWEE, 

Of  check,  see  Checks. 

DRAWER, 

Of  check,  see  Checks. 

DUTIES, 

And  other  debts  to  United  States,  in  what  currency  paid,  475. 

DUTY, 

Of  banking  corporation  to  receive  deposits,  15. 

E 

EMBEZZLEMENT, 

By  officers  of  national  banks,  405. 

ENTRY, 

Of  deposits,  24. 

EXAMINATION, 

Of  books  of  national  bank,  right  of  holder,  see  National  Banks. 

EXAMINERS, 

Of  national  banks,  see  National  Bank  Act. 

EXCHANGE, 

Power  of  banking  corporation  to  buy  and  sell,  276. 
National   banks,   277. 

See   Banking   Corporations;    Bill  of   Exchange;    Loans 
and  Discounts. 


INDEX  647 

[The  figures  refer  to  pages] 
EXECUTION, 

Agaiust  natioual  bank,  425. 
EXECUTORS, 

Holding  stock  in  national  bank,  liability,  386,  494, 
EXTENSION, 

Of  corporate  existence  of  national  banks,  :>07. 
See  National  Bank  Act ;   National  Bunks. 


F 

FALSE   ENTRIES, 

By  officer  of  national  banks,  405. 

FICTITIOUS  PAYEE, 
Of  check,  173. 
See  Checks. 

FOLLOWING  TRUST  FUND, 

See  Insolvency. 

FOREIGN  BANK, 
Check  on,  99. 

FOREIGN  BANKING  CORPORATIONS, 
Power  to  engage  in  business,  272. 
See  Banking  Corporations. 
FORFEITURE, 

Of  chax'ter  of  banking  corporation,  345. 
Of  franchise  of  national  bank,  410. 
See  National  Banks. 

FORGED   CHECK, 

Certification   of,   134. 
Payment  of,  159. 
See  Checks. 
FRAUD, 

Receiving  deposits  after  iBsolvency,  208,   349. 

See  Collections;    Insolvency. 
Subscription  to  stock  in  national  bank  induced  by,  374. 
FRAUDS,   STATUTE  OF, 

As  affecting  oral  promise  of  drawee  to  pay  check,  138. 
See  Checks. 


FRAUDULENT  IMPERSONATION, 
Of  payee  of  check,  175. 


GARNISHMENT, 

Of  deposit,  42,  53. 


G48  INDEX 

[The  figures  refer  to  pages] 

GENERAL  DEPOSIT, 

See  Deposits. 

GIFT, 

Deposit  in  name  of  another  as,  51. 
Of  deposit  in  savings  bank,  454. 
See  Savings  Banks. 

GOLD   NOTES, 

Issue  by  national  banks,  527. 
See  National   Bank  Act. 

GOOD  FAITH, 

Duty  of  collecting  bank  to  exercise,  192,  201. 
See  Collectioiis. 

GRACE, 

Days  of,  check  not  entitled  to,  99. 

GUARANTY, 

Power  of  banking  corporation  to  enter  into,  contract  of,  284. 
See  Banking  Corporations. 


H 

HOLDER  IN  DUE  COURSE, 
Of  check,  125. 
Bank  as,  of  paper  discounted,  234. 

See  Loans  and  Discounts. 
Of  bank  note,  260. 


IDENTIFICATION, 
Of  trust  fund,  354. 
See  Insolvency. 

IMPAIRMENT, 

Of  capital  of  national  bank,  373. 
See  National  Banks. 

INCORPORATED  BANK, 

See  Banking  Corporations. 

INCREASE, 

Of  capital  stock  in  national  bank,  3G9. 

See  National  Bank  Act;   National  Banks. 

INDORSEMENT, 

For  collection,  29. 
For  deposit,  .32. 
Of  check  forged,  159. 
See  Checks. 


INDKX  649 

[The  figures  refer  to  pages] 
INDORRER, 

Of  cht'ck.  lialiility,  119,  121. 

S(H'  Checks.  ^^^^ 

INJUNCTION, 

Against  national  bank,  425. 

INSANITY, 

Of  drawer  of  check,  as  revocation  of  onlor,  155. 

INSOLVENCY, 

As  ground  of  set-off,  61,  65. 

See  Deposits. 
Of  bank,  effect  on  relation  between  bank  and  depositor  for  col- 
lection, 205,  208. 
See  Collections. 
Of  borrowing  bank,  effect  on  right  of  set-off  of  collecting  bank. 
213,   220. 
See  Collections. 
Remedies  of  creditors  of  insolvent  banking  corporation  against 
officers,  297,  304. 
See  Banking  Corporations. 
Of  bank,  what  constitutes,  345,  346. 
Duty  of  bank,  345,  346. 
Liquidation,  how  effected,  345,  346. 
Transfers  and  payments,  affected  by,  345,  346. 
Right  to  prefer  creditors,  346. 
Payments,  when   invalid,  347. 

Payment  of  deposit  during  run,  348. 
Deposit  after,  349. 

Receiving  by  bank  when  fraudulent,  349. 

Bank  a   constructive  trustee,  349,  350. 
Remedies  of  depositor,  349,  351. 
Rights  of  holder  of  checks  and  drafts  issued  by  bank,  352. 
Rights  of  holder  of  checks  and  drafts  drawn  on  bank,  352. 
Set-off.  right  of  debtor  of  bank,  353. 
Wrongful    receipt    of    deposit,    354. 
Bank  a  constructive  trustee,  354. 
Following  trust  fund,  354. 
Of  national  bank,   involuntary  liquidation,  413. 
Transfers  and  payments  affected  by,  421. 
See  National  Banks. 
Of  savings  banks,  450. 
See  Bankruptcy. 

INSTRUCTIONS, 

Duty  of  collecting  bank  to  follow.  192,  200. 
To  collecting  bank  to  remit,  207.  ' 

See  Collections. 


G50  INDEX 

[The  figures  refer  to  pages] 
INTEREST, 

On  deposit,  56,  60. 

See  Deposit. 
Rate  of,  on  loans  and  discounts,  usury,  235. 
See  Loans  and  Discounts. 

INTERPLEADER, 

Right  of  banli  to  bring,  on  notice  of  adverse  claim  to  deposit, 
50. 

ISSUE, 

Banks  of,  3. 

J 

JOINT  DEPOSIT, 

In  savings  banks,  459. 

JURISDICTION, 

In  suits  by  and  against  national  banks,  428. 
See  National  Banks. 


L 

LIEN, 

Of  bank  on  general  deposit,  61. 

See  Deposits. 
Of  bank,  on  paper  deposited  for  collection  and  proceeds,  205,  210. 
Of  collecting  bank  on  paper  forwarded  for  collection  and  pro- 
ceeds, 213,  320. 

See  Collections. 
Of  bank,  on  collateral  security,  255. 

See  Loans  and  Discounts. 
On  shares  of  stock  of  national  banks,  377. 

See  National  Banks. 

LIMITATION, 

See  Statute  of  Limitations. 

LIQUIDATION, 

Of  insolvent  bank,  345,  346. 

See  Insolvency. 
Of  national  banks,  voluntary,  368. 

Of  national  banks,  enforcement  of  shareholders'  liability,  392. 
Of  national  bank,  voluntary,  411. 
Involuntary,  413. 

See  National  Bank  Act;    National  Banks. 

LITIGATION, 

Powers  of  president  of  bank,  in  respect  to,  314. 

LOANS  AND  DISCOUNTS, 

Power  of  banking  corporations  to   make.   225.   227. 
Restrictions  on  power  of  banking  corporations  to  loan,  225.  227 


INDEX  651 

[The  figures  refer  to  pages] 
LOANS  AND  DISCOUNTS— Cont'd. 

Remedy  for  nonobservauce,  227. 
Excess  of  loans  by  national  banks,  228.        _-*--" 
Meaning  of  discount,  22G,  228. 
Powers  of  banking  corporations  to  discount.  2.30. 
Power  to  discount  by  way  of  purchase,  230, 
National  banks,  230. 
Rate  of  interest,  232. 
Purchase  without  indorsement,  233. 
Effect  of  purchase  if  ultra  vires,  2.34. 
Rights  and  liabilities  of  bank  as  to  paper  discounted,  234. 
Right  to  rediscount,  234. 
Bank  as  holder  in  due  course,  234. 
Rate  of  interest — usury,  235. 

Interest  chargeable  by  national  banks,  235,  239. 
What  rate  may  be  charged,  240. 
Application  of  rate  to  discounts,  241. 
Forfeiture  of  interest  when  rate  excessive,  242. 
Recovery  when  excessive  interest  paid,  243. 
Discount  of  paper  void  for  usury  by  state  laws,  245. 
Limitation  as  to  rate  in  general,  236. 

When  applicable  to   discounts,  236. 
What  constitutes  usury,  2.36. 
Effect  of  usury,  238. 
Collateral  security  for  loan,  246. 

Power  of  banking  corporation  to  take  in  general,  246,  248. 

National  banks,  248. 
Shares  of  stock  in  other  corporations,  248. 
Shares  of  bank's  own  stock,  247,  249. 

National  banks,  247,  249. 
Real  estate  mortgage,  247,  250. 

National  banks,  247,  251. 
Bill  of  lading  accompanying  draft  discounted,  252. 
Lien  on,  255. 

See  National  Bank  Act;    National  Banks. 

LOST  BANK  NOTES, 
Recovery  on,  263. 

M 

MARRIED  WOMEN, 

Liability  as  shareholder  in  national  bank,  384. 

MEMORANDUM  CHECKS, 
Nature  and  effect,  100. 

MISAPPLICATION. 

Willful,  of  funds  of  national  bank  by  officer.  405. 


G52  INDEX 

[The  figures  refer  to  pages] 
MISTAKE, 

Payment  of  check  under,  as  to  funds,  14S,  149. 
As  to  drawer's  signature,  159,  100. 
As  to  altered  check.  159,  160. 
As  to  forged  indorsement,  159,  171. 
See  Checks. 

MORTGAGE, 

Power  of  banking  corporatiun  to  take,  247,  250. 
National  banks,  247,  251. 

See  Loans  and  Discounts. 


N 

NATIONAL  BANK   ACT   {including  other  statutes  relating   to  na- 
tional hanks), 
See  Comptroller  of  the  Currency;   Crimes;   National  Banks; 
National   Currency   Associations. 
Constitutionality,  362. 

Comptroller  of  the  currency  not  to  be  interested  in  (§  329),  465. 
Jurisdiction  of  district  courts  in  suits  by  and  against,  468. 
District   attorneys    to    conduct    suits    respecting,    when    United 

States  interested  (§  380),  468. 
Copy  of  organization  certificate  of,  when  and  of  what  evidence 

(§  885),  469. 
Taxes,    exemption    from    tax    on    circulation    when    outstanding 
amount  is  reduced  to  5  per  cent,  of  capital  (§§  3411,  3417), 
471,  474. 
Exemption  from  tax  on  circulation  upon  depositing  in  Unit- 
ed States  Treasury  lawful  money  to  amount  -of  outstand- 
ing notes  after  ceasing  to  issue  notes  for  circulation   (§§ 
3411,   3417),   471,   474. 
Of  10  per  cent,  on  notes  of  persons  or  state  banks  used  or 
paid  out  by,  472,  474 
On  notes  of  town,  city,  or  municipal  corporation  paid 

out  by  them,  472.  474. 
Application  of  provisi9ns  to  evidences  of  indebtedness, 

472. 
Monthly  returns  to  be  made  of  amount  of  such  notes 
paid  out  m  3414.  3417),  473.  474. 
State  banks  converted  to  national  (§  3416),  474. 
Taxation  of  national  banks.  477. 
Notes  subject  to  state  taxation,  477. 

Semiannual,  on  circulation  and  deposits  (§  5214),  549,  550. 
Returns  for   (§  .5215),  551. 
Failing  to  make  returns  or  pay  duty  (§§  5216,  5217),  551. 


iM>'-^  653 

[The  figures  refer  to  pages] 
NATIONAL  BANK  ACT— Contd. 

KofunclinK  of  excessive  duties  (§  5218),  552. 
How  subject  to  state  taxatiou  (§  5219).  552.    ^^ 
Circulutiug   uotes,   receivable    for   debts   of    Uuited'^States,   ex- 
cept, 476. 
Destructiou  by  nuiceratiou,  476. 
Marking  cownterfeit  notes,  477. 

Wrongfully  marked  counterfeit  to  be  redeemed,  477. 
Subject  to  state  taxation,  477. 

Redemption,    when    issued    prior   to   extension   of   corporate 
succession,  4S5. 
Reserved  in  treasury  for  redemption  of,  5'3:i. 
Of  worn,  defaced,  mutilated,  etc.,  S-jo. 
Clerical  force  for  redemption  of,  5:>4. 
Disposition  of  moneys  deposited  for  and  redemption  of 

536. 
Of  tlaose  lost  or  stolen,  •5;:'.7. 

In  case  of  dissolution  of  bank   (§§  5220-5225),  553-555. 
Mode  of  protesting,  for  nonpayment  (§  5226),  5,55. 
Proceedings  on   failure   to   redeem,    by    bank    (§§   5'^'>7- 
5233),  556-55S. 
For    redemption   of,   at   treasury    of   United    States 
(§  5229),  556. 
Disposal  of.  on   presentation  at   treasury  for  payment 

557. 
Presented  at  treasury  for  payment,  to  be  canceled,  558. 
To  be  received  at  par,  by  public  depositaries  In  payment  of 

internal  revenue  or  for  loans  or  stocks  (§  5153),  494. 
Provisions   for  obtaining  and   issuing     (§§   5157-5187),   500- 

528. 
Reduction  of  amount  or  retirement  in  full  of,  504. 
Withdrawal  of,  on  deposit  of  lawful   money.  504,  505. 
Delivery  of,  on  deposit  of  bonds,  517. 
Printing,  denominations,  etc.  (§  5172),  510. 
Comptroller  to  have  control  of  plates,  etc.  (§  5173),  521. 
Charter  numbers  of  bank  to  be  printed  on,  521. 
Distinctive  paper  for,  521. 

Wihat  debts  may  be  paid  in  (§§  3473,  3475),  521,  522. 
Examination  of  plates,  etc.  (S  5174).  .522. 
Limit  of  amount  of  small  notes  (§  5175)  522. 
Aggregate  amount  of,  not  limited.  523. 
How  signed,  etc.;    for  what  receivable  (§  5182),  525. 
None  other  than  those  authorized  by   law  to  be  issued   (S 

518;!).  526. 
Destroying,  etc.,  worn-out  (§  5184).  526. 
Gold  notes,  may  be  issued  by  banks  organized  for  that  pur- 
pose, how   (S§  5185,  5186),  527. 
Removal  of  limitation  of  amount  of  circulation,  527. 


654  INDEX 

[The  figures  refer  to  pages] 

NATIONAL  BANK  ACT— Cont'd. 

Penalties  relating  to  notes,  for  issuing  notes  to  unauthor- 
ized associations   (§  5187),  528. 
For  counterfeiting,  572. 

For  circulating  bills  of  expired  banks,  575. 
For  imitating  notes  with  advertisements,  576. 
For  mutilating,  perforating,  etc.,  576. 
To  be  received  by  all  banks  (§  5196),  539. 
Not  at  par  not  to  be  paid  out  by  banks  (§  5206),  544. 
Included  under  term  "obligation  or  other  security  of  the 
United  States"'  in  laws  relating  to  crimes,  571. 
Regulation  of  business,  officers,  to  mark  counterfeit  notes,  477. 
Name  or  location,  change  of,  effect  on  debts  and  liabilities 

and  suits,  481. 
Place  of  business  located   (§  5190).  530. 
Reserve,  reserve  prescribed  (§  5191),  530. 

Reserve  prescribed,  what  may  be  included  in  (§  5192), 

532. 
To  be  determined  by  deposits,  532. 
For  redemption  of  circulation,  533. 
Additional  reserve  cities,  535. 
Additional  central  reserve  cities,  536. 
Redemption    agencies ;     may    deposit    half    of    reserve 
with,  if  in  New  York  (§  5195),  538. 
Shall  receive  notes  of  each  other  at  par  (§  5196),  539. 
Loans  and  interest,  rate  of  interest  by  (§  5197),  539. 
Penalty  for  taking  unlawful  interest  (§  5198),  540. 
Limit  of  loans  to  one  person,  etc.  (,§  52UUi.  541. 
Not  to  loan  on  or  purchase  their  own  stock  (§  5201), 

542. 
Limit  as  to  indebtedness  of  (§  5202),  542. 
Not  to  pledge  their  own  notes,  etc.  (§  5203),  542. 
Dividends  of  (§  5199).  541. 
Not  to  withdraw  capital,  when  not  to  declare  dividend  (§ 

5204).  542. 
Failure   to   pay   up   or   impairment  of   capital   stock   of    (§ 

5205),  543. 
Officers,  not  to  certify  checks  imless  (§  5208),  544. 
Not  to  pay  out  notes  of  other  banks  which  are  not  at  par 
(§  5206),  544. 
Tot  to  receive  United   States  notes,  etc.,   as  collateral,  etc.    (§ 
5207),  544. 
Penalty  for  embezzlement  (§  5209),  545. 
Reports,  to  make,  etc.,  report  of  assets,  etc.  (§  5211),  546.' 
Verification,  before  whom  may   be  made,   547. 
To  make  report  of  dividends,  etc.  (§  5212),  547. 
Penalty  for  failure  to  make  reports  (§  5213),  548. 


INDEX  G55 

[The  figures  refer  to  pages] 

NATIONAL  BANK  ACT— Cont'd 

To  make  return  of  amount  of  deposits,  etc..  to  treasurer 
of  United  States,  for  taxation  tberecn  (fii-S214,  5215), 
549-551. 
To  keep,  etc.,  list  of  shareholders  (§  5210),  546. 
Duty   or   tax,  -how   assessed  on  failure  to   make  return    (§ 
521G),  551. 
How  collected  on  failure  to  pay  (§  5217),  551. 
Refunding  excess  of  duty  to  (§  521S).  552. 
Shares  and  real  property  of,  to  be  liable  to  state,  etc.,  tax- 
ation (§  5219),  552. 
Act   creating   and    regulating   national    banks    to    be   known    as 

"National  Bank  Act,"  479. 
Organization  and  powers,  articles  of  association  (§  5133),  479. 
Organization  certificate,  contents  of  (§  5134),  479. 

Acknowledgment,  etc.,  of  (§  5135),  480. 
Powers  of,  as  bodies  corporate  (§  5136),  480-487. 

To  hold,  etc.,  real  property  (§  5137),  487. 
Corporate  succession,  extension  of  period  of,  482,  487. 

Extension  of  period  of,  procedure,   approval  by  comp- 
troller, 483. 
Examination  and  issue  of  certificate  of  approval  by 

comptroller,  483. 
Corporate    powers,    jurisdiction    of    suits    by     or 
against,  484. 
Withdrawal  of  dissenting  shareholders,  484. 

Redemption   of   circulating   notes   issued   prior    to, 
485. 
Dissolution  of  banks  failing  to  extend  period  of,  486. 
Minimum  capital  of  (§  5138),  488. 
Paying  in  of  capital  stock  of  (§  5140),  488. 
Failure  to  pay  installments  on  stock  (§  5141),  489. 
Increase  of  capital  (§  5142),  489. 
Reduction  of  capital  (§  5143),  490. 
Rights  of  shareholders  to  vote  (§  5144),  490. 
No  officer,  clerk,  etc.,  of,  to  act  as  proxy  (§  5144),  490. 
Individual  liability  of  shareholders  (§  5151),  493. 
Executors,  etc.,  holding  stock  not  personally  liable  (§  5152), 

494. 
Designated  as  public  depositaries,  etc.;   duties,  etc.,  494-496. 
State  banks  may  become  (§§  5154,  5155),  496.  497. 
Rights  of,  organized  under  former  act  (§  5156),  498. 
Comptroller   to  examine  preliminary   steps   in   organization 
of  (§  5168),  515. 
May  give  or  withhold  certificate  authorizing  commence- 
ment of  business  (§  51G9j,  516. 


656  INDEX 

[The  figures  refer  to  pages] 

NATIONAL  BANK  ACT— Cont'd. 

Certificate  to  commence  business  to  be  published  (§  5170), 

516. 
Of  banlvs  for  issue  of  gold  notes  (§§  51S5.  5186),  527. 
Conversion  of  gold  banks  into  currency  banks,  528. 
Shareholders,  organization  certificate  to  state  names  of  original 
(§  5134),  479. 
Shares  of,  to  be  one  hundred  dollars  each;    are  personal 

property  and  transferable,  how  (§  5139),  488. 
Failure  to  pay  installments  on  capital  (§  5141),  489. 
Directors  to  be  elected  by,  etc.  (§§  5145,  5146),  491. 
May  fix  day  for  election  of  directors  (§  5149),  492. 
Individual  liability  of  (§  5151).  493. 
May  reduce  capital  (§  5143),  496. 
Assessed  to  make  good  capital,  etc.  (§  5205),  543. 
List  of,  to  be  open  to  inspection,  and  copy  sent  to  comptrol- 
ler (§  5210),  546. 
Two-thirds  of,  may  vote  bank  into  liquidation  (§  5220),  553 
Discharge  from  liability  for  notes  (§  5224),  554. 
Surplus,  after  paying  debts,  to  be  paid  to  (§  5236),  559. 
Enforcement  of  individual  liability  of,  on  liquidation.  560. 
Meeting  of  on  dissolution  of  bank,  termination  of,  continu- 
ance of  receivership,  etc..  561. 
Directors,   board  of,  and  appointment  of  president,   vice  presi- 
dent, cashier,  and  other  officers  by  (par.  5,  §  5136),  480. 
Right  to  vote  in  election  of  {§  5144),  490. 
Number,  etc.,  of  (§  5145),  491. 
Qualifications  of  (§  5146),  491. 
Oath  of   (§  5147),  492. 

Filling  vacancies  in  board  of  (§  5148),  492. 
Failure  to  elect,  on  proper  day  (§  5149),  492. 
President  elected  from  and  by  (§  5150).  493. 
Oath   of,    required   as   to    facts   in   relation   to   organization 

(§  5168),  515. 
Penalty  for  embezzlement  by   (§  5209).  545. 
Reports  to  be  signed  by  (§  5211),  546. 

Shall  give  notice  of  vote  to  go  into  liquidation  (§  5221),  553. 
Penalty  for  violations  of  law  by  (§  5239),  568. 
Dissolution,  not  extending  period  of  succession,  486. 

To  give  notice  of  intended  dissolution  (§  5221),  533. 
How  may  go  into  liquidation  (§  5220),  552. 
Redemption  of  notes  on.   deposit   to  redeem  circulation   (S§ 
5222,  5223),  553,  554. 
Reassignment  of  bonds,   redemption  of  notes   (§  5224), 

554. 
Destruction  of  redeemed  notes  (§  5225j,  555. 


INDEX  G')? 

[The  figures  refer  to  pages] 

NATIONAL  BANK  ACT— Contd. 

Notice  to  holders  of  notes  of,  redemption  of  notes,  sale 

of  bonds  (§§  5229-5231),  556,  557.  .,*^ 

Disposal  of  redeemed  notes  of  (§  5232).  557. 
Notes  paid  at  treasury  to  be  canceled  (§  5233),  558.  - 
Protesting  notes  of,  manner  of  (§  5226),  555. 
Failure  to  pay  note  of,  proceediuss  on  notice  (§  5227),  556. 
Business  of,  after  failure  to  pa-y  notes  (§  5228).  556. 
Enforcement   of  sbareholders'   individual   liability  by  credi- 
tors, 560. 
Transfers  after  act  of  insolvency  void  (§  5242),  570. 
Receivers,    appointment    of    i-eceivers    of,    wben    bank    fails    to 
make  capital  equal  to  minimum   (S  5141),  4S0. 
Appointment  of  receivers  of,  wlien  reserve  is  not  made  good 
(§  5191),  530. 
On    failure    to    pay    circulating   notes,    and    duties    (§S 

5195,  5234),  538,   558. 
For  banks   violating  law,   failing  to   pay  judgment,  or 
becoming  insolvent,   560. 
Notice  to  creditors,  to  present  claims  (§  5235),  558. 
Dividends  to  creditors  (§  5236),  559. 
Receiver  may  be  enjoined,  when  (§  5237),  559. 
Fees  and  expenses  of  receivers,  etc.,  of  (§  5238),  559. 
Shareholders'   meeting,    continuance  of  receiver   or  appoint- 
ment of  agent,   winding  up   business,   dLstribution  of  as- 
sets, 561. 
Purchase  by  receiver  of  property  of  bank,  request  to  comj)- 

troller,  567. 
Approval   by    comptroller   of   request    by    receiver    for    pur- 
chase of  property  of  bank,  567. 
Payment  for  property  of  bank,  purchased  by  receiver,  from 

trust  fund  deposited  with  United  States  treasurer,  568. 
Approval  by   Secretai'y  of  Treasury  of  request  by  receiver 
for  purchase  of  property  of  bank,  568. 
Deposit  of  bonds,  before  commencing  business  (§  5159),  500. 
What  bonds  may  be  deposited  (§  5158),  500. 
Increase  or  decrease  according  to  capital  (§  5160),  500. 
Registered,  to  be  issued  for  coupon  bonds  (§  5161),  501. 
Transfer  of  bonds  by,  how  made,  etc.,  (§  5162),  501. 
Register  of   transferred   bonds   and  notice  of  transfers   (§§ 

5162,  5163,  5164),  501,  502. 
Examination   of   books   of   ti-easurer    relating   to    transfers, 

etc.  (§  5165),  502. 
Annual  examination  of  bonds  of  (§  5166),  502. 
Custody   of  bonds,   collection  of,   interest   on,  etc.   (§   5167), 

503. 
Amount  of  bonds  required,  reduction  of  amount,  504 
Tiff.Bks.&  B. — 42 


G58  INDEX 

[The  figures  refer  to  pages] 

NATIONAL  BANK  ACT— Cont'd. 

Withdrawal  of,  on  withdrawal  of  circulating  notes  and  de- 
posit of  money,  504,  505. 
What  associations,  etc.,  are  subject  to  laws  relating  to  (§  5157), 

500. 
Examiners,  in  case  of  failure  to  redeem  notes  (§  5227),  556. 

Appointment,  duties,   and  compensation,   (§  5240),  56S. 
Title  "national"'  not  to  be  used  by  other  banks  (§  5243),  570. 
Visitorial  powers  over,  banks  subject  to  none  except  such  as 
authorized  by  law  (§  5241),  570. 

NATIONAL  BANK  NOTES, 
See  National  Bank  Act. 

NATIONAL  BANKS, 
In  general,  360.  361. 
National  bank  act,  361. 

Constitutionality,  362. 
Power  of  states,  362. 

Operation  of  state  legislation,  363. 
Formation,  364. 

In  general,  364. 

Who  may  form,  364. 
"\Mien  may  transact  business,  365. 
Certificate  of  organization.  365. 
Jurisdiction  of  comptroller  of  currency,  365. 
Organization  of  state  banks  as  national  banks,  366. 

Effect  of  change,  366. 
Continuance  of  corporate  existence.  367. 
Extension  of  corporate  existence,  367. 
Voluntary  liquidation,  368. 
Capital  stock.  368. 
In  general,  369. 
Amount,  369. 
Payment  of,  369. 
Failure  to  pay,  369. 
Increase,  369. 

Approval  of  comptroller  of  currency,  369. 
What  necessary  to  valid  increase,  370. 
Effect  of  disregard  of  requirements.   370. 
Effect  on  stockholders'  liability,  371. 
Reduction,  372. 

Approval  of  comptroller  of  currency,  372. 
Disposition  of  surplus,  372. 

When  capital  impaired,  372. 
Impairment  of  capital,  373. 

Payment  of  deficiency,  373. 
Receivership,  373. 
Assessments,  373. 


INDEX  669 

[The  figures  refer  to  pages] 
NATIONAL  BANKS— Contd. 

Subscription  to  iin  issue  of  stock,  374. 

Effect  of  froud,  374.  -^*^ 

Transfer  of  sliares.  375. 

May  lie  made  to  wtiom,  375. 
When  complete,  between  seller  and  buyer.  376. 
Transfer  on  books,  when  necessary,  370. 
As  against  stockholders'  liability.  376. 
Not  against  transferror's  attaching  creditors,  376b 
Lien  on  shares,  377. 

Bank  has  no  lien  for  debts,  377. 
May  not  enfoi'ce  by-law  giving  lieu,  377. 
Rights  of  stockholders,  378. 
Right  to  vote,  37S. 
Proxies,  376. 

Effect  of  unpaid  subscription,  378. 
Right  to  examine  books,  378. 
Dividends,  379. 

Directors  may  declare,  379. 
Limitations,  379. 

Effect  of  declaration  in  violation  of  law,  380. 
Liability  of  stockholders  for  debts  of  bank,  381. 
Who  liable  as  shareholders.  382. 
Who  deemed  shareholders,  383. 
Pledgee,  385. 
Trustee,  386. 

Deceased  stockholders.  387. 
Effect  of  transfer,  388. 
Enforcement  of  liability,  392. 
Involuntary  liquidation.  392. 
Voluntary  liquidation,  395. 
Officers,  in  general,  396. 

Civil  liability  of,  at  common  law,  397,  398. 
Civil  liability,  statutory,  397.   398. 

Enforcement  of  common  law  liability,  400. 
Enforcement  of  statutory  liability,  401. 
Criminal  liability,  405. 

Wrongfully  certifying  check,  405. 

Embezzlement,   abstraction,   and  willful  misapplication, 
etc.,  406. 
Forfeiture  and  dissolution,  410. 
Voluntary  liquidation,  411. 
Involuntary  liquidation,  413. 

Api)ointment  of  receiver,  413. 
Effect  of  appointment,  415. 
Powers  and  duties  of  receiver,  416. 
Actions  by  receiver,  417. 


660  INDEX 

[The  figures  refer  to  pages] 

NATIONAL  BANKS— Cont'd. 

Proof  and  payment  of  claims  and  distribution,  418. 

Agent  wlien  receiver  has  paid  debts,  420. 
Transfers  and  payments  affected  by  insolvency,  421. 

Preferences,  421,  423. 

Meaning  of  insolvency,  422. 
Attachments,   injunctions,   and  executions,   425. 
Actions  by   and  against,  428. 

In  general,  428. 

Jurisdiction  under  original  act,  429. 

Later  provisions  as  to  citizenship,  430. 

Actions  by  and  against  receivers,  432. 

Removal,  433. 

Changes  by  act  of  1911,  433. 
Taxation  by  states,  434. 

In  general,  434. 

Povser  of  Congress  and  states,  435. 

Capital  and  shares,  436. 

Discrimination  between  shares  and  other  moneyed  capital, 
438. 

Other  moneyed  capital,  4.39. 
Povs'er  to  receive  special  deposits,  16. 
Power  to  issue  certificates  of  deposit,  79. 
Excess  of  loans  by,  228. 

See  Loans  and  Discounts. 
Power  to  discount,  230. 

See  Loans  and  Discounts. 
Interest  chargeable  by,  on  loans  and  discounts,  233,  239. 

See  Loans  and  Discounts. 
Power  to  take  collateral  security,  in  general,  246,  248. 

Shares  of  bank's  own  stock,  247,  249. 
Effect  of  taking,  250. 

Real  estate  mortgage,  247.  250. 
See  Loans  and  Discounts., 
Bank  notes,  issue,  265. 

Nature  of  obligation,  265. 
Place  of  transacting  business,  269. 

See  Banking  Corporations. 
Power  to  buy  and  sell  property,  276. 

Exchange,  coin  and  bullion,  277. 

Shares  of  stock  in  other  corporations,  277. 

Baniv's  own  stock,  279. 

Real  estate.  281. 

See  Banking  Corporations. 
Power  to  borrow  money,  282. 

Limit  of  indebtedness,  283. 


INDEX  GGl 

[The  figures  refer  to  pages] 

NATIONAL  BANKS— Cont'd. 

Effect  of  exceeding  limit,  2S4.  ^^^^ 

See  Banking  Corporations. 
Power  to  enter  into  contract  of  guaranty  or  suretyship,  2S4. 
Effect  of  ultra  vires  transaction,  li86. 
See  Banking  Corporations. 
Power  to  enter  Into  other  contracts,  287. 
Contract  of  partnership,  288. 
See  Banking  Corporations. 
Ultra  vires  acts  and  contracts,  295. 

ElTect  of   transactions   unauthorized   or   prohibited   by   national 
bank  act,  295. 
See  Banking  Corporations;    National  Bank  Act. 

NATIONAL  CURRENCY   ASSOCIATIONS, 
See  National  Bank  Act. 

Formation  by  national  banks,  507. 

Not  more  than  one  to  be  formed  in  any  city,  507. 

Qualifications  for  membership,  507. 

Name,  507. 

Officers,  507. 

By-laws,  507. 

Management  of  affairs,  507. 

Powers,  507. 

Dissolution  of  bank  not  to  affect  corporate  existence  of  associa- 
tion, 507. 

Deposit  of  additional  securities  by  members,  507. 

Issue  of  additional  circulating  notes  on  deposits  of  securities. 
507. 

Liability  of  banks  and  lien  on  assets  for  redemption  of  notes, 
,507. 

Sale  of  securities  deposited,  507-514. 

Issue  of  additional  circulating  notes  on  deposit  of  bonds  other 
than  United  States  bonds,  511. 

Failure  of  member  to  preserve  or  make  good  redemption  fund, 
510. 
I  Redemption  fund,  application  of  fund  belonging  to  other  banks, 
510. 

Authority  of  Secretary  of  Treasury  as  to  control  and  manage- 
ment, 515. 

Appropriation,  515. 

NEGLIGENCE, 

Of  bank  in  care  of  special  deposits,  17. 
Facilitating  alteration  of  check,  1G9. 

NE(iOTiABILITY. 
Of  check,  119. 
See  Checks. 


662  INDEX 

[The  figures  refer  to  pages] 

NEGOTIABLE  PAPER, 

See  Commercial  Paper. 

NOTARY  PUBLIC, 

Default  of,  liability  of  collecting  bank,  198. 
See  Collections. 

NOTE, 

See  Bank  Notes;   Promissory  Note. 

NOTICE, 

To  officer  or  agent  of  bank,  333. 

See  Representation  of  Bank  by  Officers. 

NOTICE  OF  DISHONOR, 

When  necessary  to  charge  drawer  of  check,  107. 
When  necessary  to  charge  indorser  of  check,  119. 

See  Checks. 
Duty  of  collecting  bank  to  give,  192,  196. 

See  Collections. 

o 

OFFICERS,  V 

Public,  deposit  in  violation  of  law,  44. 
Of  bank,  rules  of  agency  applicable  to,  308. 
Of  banking  corporation,  appointment,  and  authority,  309. 
See  Representation  of  Bank  by  Officers. 
Liabilitj'  of,  296. 

See  Banking  Corporations. 
Of  national  bank,  in  general,  396. 
Civil  liability  of,  397. 
Criminal  liability,  405. 

See  National  Bank  Act;    National  Banks. 
Of  savings  banks,  446. 

ORGANIZATION   CERTIFICATE, 

Of  national  bank,  as  evidence,  364,  365,  469. 
See  National  Bank  Act;    National  Banks. 

OVERDRAFTS, 

Nature  and  effect  of,  82. 

OVERDUE  CHECK, 

When  check  overdue  or  stale,  120,  126. 


P 

PARTNERSHIP, 

Bank's  lien  on  deposit  of,  70. 

On  deposit  of  partner,  70. 
See  Deposits. 
Power  of  banking  corporation  to  enter  into,  288. 

See  Banking  Corporations. 


INDEX  6C3 

[The  figures  refer  to  pages] 
PASS-BOOK, 

Entry  of  deposit  in,  25. 

See  Deposits.  — *■— 

In  savings  bank,  payment  ou  production  of,  451. 
See  Savings  Banks. 
PAYEE, 

Of  check,  102. 
See  Checks. 

PAYING  TELLER, 
See  Teller. 

PAYMENT, 

Of  deiwsit,  56,  59. 

See  Deposits. 
Of  checks,  see  Checks. 
How  made  to  collecting  bank,  201. 

By  collecting  bank  to  forwarding  bank,  220. 
See  Collections. 
Bank  notes  as,  257. 

See  Bank  Notes. 
By  insolvent  bank,  when  invalid,  345,  346. 

See  Insolvency. 
On  production  of  pass-book  in  savings  bank,  451. 

See  Savings  Banks. 

PLEDGEE, 

Of  shares  in  national  bank,  liability,  3S5. 
See  National   Banks. 

POSTDATED  CHECKS, 
Effect  of,  102. 

POWERS, 

Of  banking  corporations,  see  Banking  Corporations. 
Of  national  banks,  see  National  Bank  Act;   National  Banks. 
PREFERENCES, 

By  insolvent  banking  corporations,  345,  346. 

See  Insolvency. 
By  national  banks,  421. 

PRESENTMENT, 

When  necessary  to  charge  drawer  of  check,  107. 

To  charge  indorser  of  check,  119. 
See  Checks. 
Of  paper  deposited  for  collection,  192,  194. 

See  Collections. 

PRESIDENT, 

Of  banking  corporation,  313. 

See  Representation  of  Bank  by  OflBcers. 
Of  national  bank,  appointment,  396. 


604  INDEX 

[The  figures  refer  to  pages] 
PRICE  V.   NEAL, 
Doctrine  of,  162. 

PROMISSORY  NOTE, 
Payable  at  bank,  58. 

When  maker  deposits  money   in  payment,   191. 

When  holder  deposits  note  in  bank  for  collection,  191. 
Deposited   for   collection,   duty   of  collecting  bank,   192. 

See  Collections;    Commercial  Paper;    Loans  and  Discounts. 

PROTEST, 

Of  checks,  115. 

See  Checks. 
Duty  of  collecting  bank  to  make,  192,  194. 

See  Collections. 

PROXY, 

Shareholder  in  national  bank  may  vote  by,  378. 

PUBLIC  DEPOSITARIES, 
See  Depositaries. 

PUBLIC  OFFICER, 

Deposit  by  in  violation  of  law,  44. 


R 

RATIFICATION, 

Power  of  directors  to  ratify,  312. 

See  Representation  of  Bank  by  Officers. 

REAL  ESTATE, 

Power  of  banking  corporations  to  liuy  and  sell,  280. 
National  banks^  281. 

See  Banking  Corporations. 

REASONABLE  TIME, 

For  presentment  of  check,  107,  109. 
See  Checks. 

RECEIVER, 

To  enforce  liability  of  shareholders  of  national  bank,  392. 
To  wind  up  national  bank,  413. 

Of  national  banks,  actions  by  and  against.  428,  432. 
See  National  Bank  Act ;    National  Banks. 

RECEIVING  TELLER, 
See  Teller. 

REDEMPTION, 

Of  national  bank  notes,  see  National  Bank  Act. 
REDISCOUNT, 

Right  of  bank  to  rediscount,  2.34. 
See  Loans  and  Discounts. 


imm:x  665 

[The  figures  refer  to  pages] 
REDUCTION, 

Of  capital  stock  in  national  bank.  372. 

See  National  Bank  Act;    National   liaiiter- 

REGULATION. 

Of  business  of  national  banks,  see  National  IJank  Act 

REMOVAL, 

Of  action  by  or  apiinst  national  bank,  433. 
See  National  Hanks. 

REPORTS, 

Of  national  banks,  see  National  Bank  Act. 

REPRESENTATION   OV  ftANK  BY   OFFICERS, 

Application  of   rules  of  agency,  308. 
Directors  of  banking  corporation,  309. 

Powers  in  general,  309. 

Appointment  of  agents,  310. 

Must  act  as  a   board,   312. 

Ratification,  312. 
President,   313. 

Authority  in  general,  313. 

Authority  express  or  implied,  31.5. 

Tendency  to  assimilate  powers   to   those  of  cashier,  316. 
Cashier.  318. 

Authority  in  general.  318. 

Authority  express  and  implied,  319. 

Powers  inherent  in  office,  321. 
^    Powers  not  inherent,  323. 

Signature   of   negotiable   instruments,    326. 
See  Cashier. 
Tellers  and  subordinate  officers,  327. 

Authority   in  general,  327. 

Paying  and   receiving   tellers.   327. 
Admissions   and  representations,   .328. 

Application  of  rules  of  agency,  .328. 

Torts  and  wrongful  acts,  .331. 
Notice,  333. 

Application  of  rules  of  agency,  333. 

Disclosure  against  interest,  333.  338. 

Officer  engaged  in  independent  fraud,  .338. 
Officer  openly  acting  in  his  own  behalf,  339. 
REPRESENTATIONS. 

Of  officer  of  bank,  328. 

See  Representation  of  Bank  by  Officers. 

RESERVE, 

Of  national  banks,  see  National  Bank  Act. 

RESTRICTION, 

On  right  to  engage  in  banking,  8. 


66G  INDEX 

[The  figures  refer  to  pages] 

REVOCATION, 

Of  order  for  payment  of  check,  152. 

RULES, 

Of  clearing  house,  see  Clearing  House. 

RUN, 

In  bank,  payment  of  deposit  during,  348. 
See  Insolvency. 

s 

SAVINGS  BANKS, 

Nature  of,  in  general,  442. 

Powers,    ultra    vires,    444. 
Management   and   officers,   446. 
Relation  between  bank  and  depositor,  448. 

Insolvency,  450. 
By-laws — contract  of  deposit,  450. 
Payment  on  production  of  pass-book,  451. 
Gift  of  a  deposit,  454. 

Deposit  in  trust,  455. 

Deposit  in  name  of  another,  457. 

Delivery  of  pass-book  by  way  of  gift,  458. 

Joint  deposit,  459. 

SET-OFF, 

Right  of,  of  bank,  against  general  deposit,  61. 
Of  depositor  against  bank,  73. 

See  Deposits. 
Of  collecting  bank  against  forwarding  bank,  213,  220. 

See  Collections. 
Of  debtor  of  insolvent  bank,  353. 

See  Insolvency. 

SHAREHOLDERS,^ 

In  national  banks,  right  to  vote,  378. 
Right  to   examine  books,   378. 
Liability  for  debts  of  bank,  381. 

See   Banking   Corporations;    National   Bank   Act;    Na- 
tional Banks;    Shares  of  Stock. 

SHAREHOLDERS'    LIABILITY, 
See  Shareholders. 

SHARES  OF  STOCK, 

Power  of  banking  corporations  to   take  as  collateral   security. 
246  et  seq. 
See  Loans  and  Discounts. 
In  other   corporations,   power   of  banking  corporations  to  buy 
and  sell,  277, 
National  banks,  277. 


INDEX  667 

[The  figures  refer  to  pages] 
SHARES  OF   STOCK— Cont'd. 

Bank's  own  stock,  power  of  banking  corporations  to  buy  and 
sell,  279.  '  -*- 

National  banks,  279. 

See  Banking  Corporations. 
Authority  of  cashier  to  transfer  on  books,  323. 

In  national  banks,  transfer  of,  see  National  Bank  Act;   Na- 
tional Banks. 

SIGNATURE, 

Of  check,  106,  155. 

See  Checks. 
Of  bank  cashier,  to  negotiable  instruments,  326. 

See  Cashier. 

SLANDER, 

Of  credit,  by  bank's  dishonor  of  check,  143, 
SPECIAL  DEPOSITS, 

See  Deposits. 

SPECIFIC  DEPOSIT, 
See  Deposits. 

STALE  CHECKS, 

WThen  check  overdue  or  stale,   120,  126. 
See  Checks. 

STATE  BANKS, 

Organization  of  as  national  banks,  366. 

See  Banking  Corporations;    National   Bank  Act;    National 
Banks. 

STATEMENT  OF  ACCOUNT, 
By  bank,  84. 

See  Deposits. 

STATES, 

Power  over  national  banks,  3G2. 

See  National   Bank  Act;    National   Banks. 

STATUTE  OF  LIMITATION, 

On  certificate  of  deposit,  75,  SO. 
In  action  for  deposit,  90. 

See  Deposit. 
In  action  on  check,  118. 

See  Checks. 
When  l>egins  to  run  on  bank  note,  256,  262. 
STOCK, 

See  Shares  of  Stock. 

STOCKHOLDERS, 
See  Shareholders. 


008  INDEX 

[The  figures  refer  to  pages] 

STOPPING   PAYMENT, 

Of  check.   148,  152. 
See  Checks. 

SUBSCRIPTION, 

To  stock,  see  National  Bank  Act;    National  Banks. 

SURETY, 

Right  to  have  deposit  applied  in  payment  of  debt,  G2,  71. 
See  Deposits. 

SURETYSHIP. 

Power  of  banking  corporation  to  enter  into  contract  of,  284. 
See  Banking  Corporations. 


T 

TAXATION, 

Of  national  banks  by  states,  434,  437. 

See  National  Banks. 
"Bank"  and  "banker"'  detined,  469. 
Circulation  of  banks,  when  exempted  from,  471. 
Tax  on  circulation  of  banks  other  than  national,  472. 
Tax  on  notes  of  state  banks,  etc.,  472. 
Bank's  returns,  payment  of  tax,  472. 
Banks'  and  bankers'   monthly  returns,  473. 
Default  in  returns,  474. 

State  banks  converted  into  national,  returns,  474. 
Provisions  for  bank  tax  not  to  apply  to  national  banks,  474. 
Taxes  on  insolvent  banks.  474. 
State  taxation  of  national  bank  notes,  477. 
See  National  Bank  Act. 

TELLER, 

Of  bank,  authority  in  general,  327. 

See  Representation  of  Bank  by  Officers. 

TITLE, 

To   general   deposit,  41. 
See  Deposits. 

TORTS, 

Of  officers  of  banking  coriwrations,  331. 

See  Representation  of  Bank  by  Othcers. 

TRANSACTING   BUSINESS, 

By  banking  corporation,  place  of,  269. 
See  Banking  Corporations., 

TRANSFER, 

Of  shares  in  national  bank,  375. 

See  National  Banlv  Act;    National   Banks. 


iNnnx  609 

[The  figures  refer  to  pages] 
TRUST, 

In  savings  bank  deposit,  4."».'j. 
See  Savings  Banks  ;    Trustee. 
TRUSTEE,  ^'*' 

Deposit  by,  41,  44. 
Bank's  lien  on  deposit  of,  67. 

See  Dei)osits. 
Bank   receiving  deposits   after  insolvency,   constructive  trustee, 

208,  349. 
Bank  wrongfully   receiving  deposit,  con.structive  trustee,  354. 
Following  trust  fund,  .354. 
See  Insolvency. 
Of  shares   in   nation:il   bank,    liability,   38G. 
See  National  Bank. 

u 

ULTRA  VIRES, 

Effect   of   ultra    vires   acts   and   contracts   by   banking   corpora- 
tions, 289. 
See  P>anking  Corporations. 
By  savings  banks.  444. 
See  Savings  Banks. 
USURY, 

See  Interest. 

V 

VICE  PRESIDENT, 

Of  national  bank,  appointment,  .".OG. 

VISITORIAL   POWERS, 

Over  national  banks,  570. 

VOTING, 

Right  of  shareholder  to  vote,  see  National  Bank  Act;    National 
Banks. 

VOUCHER   CHECK, 

^ATiethor  negotiable  instrument,  104. 
See  Checks. 

w 

WRONGFULLY   CERTIFYING    CHECK, 

By  officers  of  national  banks,  405. 


WEST  PUBLISHIKG  CO.,  PRINTERS,  ST.  PAUL,  MINN. 


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